Vlad Selsky wrote:

- quote -

The person who prepares the LLC's tax return is in the best
position to answer your questions. Ideally, that person
should have been advising you from the beginning.

Phoebe

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kidonajourney2[at]hotmail.com (Vlad Selsky) wrote:

- quote -

Sorry, but you can't have loans for venture capital. It's
either a capital contribution, a loan or a bit of both. But
it can't be both at the same time.

At least with respect to corporations there are requirements
that a certain portion of money that goes into the business
be treated as capital if the rest is a loan. I haven't
researched this lately, but I'd guess that the same
requirement would apply to an LLC.

So you'd better get some professional help to sort this out
before you get yourselves into even more trouble than you're
in already.

Stu

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Hello,

My two colleagues and I formed an LLC and leased a building.
We gave $400,000 in personal loans to the LLC as venture
capital, for the startup of an arts and dance center. The
majority of the money went to the capital build out
(renovations included new floors, mirrors, etc...but no
tangible assets that can be physically recovered or resold).
The remainder of the money went to cover operating expenses,
legal and accounting fees, etc.

The business hasn't done well and has posted a considerable
net loss. It has steadily accumulated debt in the form of
deferred rent to the landlord. We may be getting evicted,
and the LLC may ultimately be dissolved, declare bankruptcy,
etc.

So the LLC will have a substantial business loss that can
get passed through to the LLC founders.

1) How does this get accounted? What is the limit that I can
personally write off against my income?

And the LLC has $400,000 of loans to repay.

2) Obviously the LLC cannot pay those loans, and the
founders will have to write the loans off. For me
personally, does this get treated completely separately and
irrespectively of the LLC business loss that gets passed to
me? Is there a limit as to how much I can write off with
this bad business loan?

In general, any tips as to how I can maximize my tax write
off? And any tips as to what documentation I should have to
make sure everything is legitimate?

Thanks! Vlad

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