"Norma Desmond" <ND[at]ND.com> wrote:

- quote -

That is one of the tests, yes. But by far the most popular
way of being held personally liable for your corporation's
(or LLC's) liabilities is to treat its account as your own
and not differentiate between business and personal accounts
when paying bills, etc.

Stu

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"LoTax" <lotax[at]hotmail.com> wrote:

- quote -

you make a good point. I am rusty on this, but I think one
thing to look at when trying to "pierce the corporate veil"
is capitalization with respect to the nature of the
business. So, when I remove "chunks" from my LLC, there is
still plenty of dough left in the LLC.

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LoTax wrote:

- quote -

Your analysis is right on point, IF the suer (?) sues only
the LLC. Chances are of course that he would sue both the
LLC and the individual since both would be at fault.

ChEAr$,
Harlan

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Although I wholly subscribe to the "just do it, write a
check" answer to this poster's question, I've got a feeling
there's something else at work here. Namely, inasmuch as
the LLC provides - done right, of course - a liability
shield for the proprietor, at what point does his
distribution move to that "safe" place behind the shield?
In more simple terms (my safe place) if the proprietor takes
$5,000 from his LLC and then a week later the LLC offends
someone, and then a week later the proprietor takes out
$7,000 from the LLC, and then a week later the person who
claims to have been offended files suit against the LLC and
then, again a week later, the proprietor takes $9,000 from
his LLC, and then a week later the "offended" party is
awarded damages of $25,000 from the LLC, how much if any of
the draws that the owner took will he - the owner - have to
cough up, let's say the LLC is totally broke after the
$9,000 distribution.

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- quote -

let's not confuse tax matters with the importance of
treating the LLC (or subchapter S corp) as a SEPARATE LEGAL
ENTITY, in order to achieve the desired limited liability.

I suggest you periodically transfer "chunks" of money from
your LLC to your personal account. Do not write checks by
the LLC to pay for your personal expenses, or move small
amounts of money (enough to only cover specific personal
expenses).

Your "chunks" will be either income transferred out of the
LLC to you personally, or a return of capital. It doesn't
really matter - I never make any sort of annotation when I
move my "chunks".

And, as you know, regardless of whether or when you move
your "chunks", it has nothing to do with how you are taxed
on the income from the flow through entity.

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- quote -

Same as if you were a sole-prop.

It would be a draw reducing your equity.

DR member's draws, CR cash

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"Etienne" <etiennevb[at]hotmail.com> wrote:

- quote -

It's a disregarded separate entity from the single owner.
The single owner reports profits and loss on a schedule C
and owns the bank account irregardless that the bank
identifies it by the business name. There is no such thing
as a formal distribution with regards to a sole
proprietorship (sch C business)

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"Etienne" <etiennevb[at]hotmail.com> wrote:

- quote -

As a disregarded entity, for tax purposes it's as though the
LLC did not exist. So it doesn't matter what you call the
distribution, for tax purposes it's an owner draw.

This forum isn't the place to address the legal questions
regarding the operation of the LLC
--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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Etienne wrote:

- quote -

For tax purposes the LLC is disregarded as an entity
separate from yourself. You report its income and expenses
on your Schedule C. When you withdraw funds from the
business bank account for personal use, you treat it just
like a withdrawal from the bank account of a sole
proprietorship. It's just a draw and has no income tax
consequences. You will be paying income tax on all of the
LLC's net income, whether you withdraw it or leave it in the
LLC's bank account.

Of course it is best to keep business and personal income
and expenses separate. However, if you were to pay personal
expenses out of the LLC's bank account, those would simply
be nondeductible on your Schedule C (which does not include
a balance sheet). Using the LLC's funds in that way, rather
than taking withdrawals as needed, might jeopardize the
liability protection presumably afforded to you by the LLC
structure because it would support an "alter ego" argument
by creditors of the LLC. Therefore it would be undesirable,
I think, more from a legal liability standpoint than from a
tax perspective.

Katie in San Diego

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Etienne wrote:

- quote -

There are no dumb questions; only unasked ones.

- quote -

Like Nike, "just do it."

- quote -

BAck to basics for a moment. Your LLC which you describe as
a single member (you) LLC, cannot employ you. You file as
any other proprietor would, using a schedule c and also
schedule se. You may of course employ others, but only their
FICA and withholdings appear on a 941 and 940 form.

- quote -

And since you're treated as a proprietor by IRS with it's
attendant tax filings, you ARE the business, and can't work
for yourself, and it's all your money. So call the check
anything you want to, but properly speaking its a return of
capital.

ChEAr$,
Harlan Lunsford, EA n LA

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Probably dumb question, but I only have experience with
C-corporations.

If I am the single owner of an LLC that is a disregarded
entity (flow-through) for tax purposes, how do I practically
distribute retained earnings to myself, in other words, how
do I take money out of the LLC?

Let's say that I have $50,000 in my LLC's bank account, and
want to take out $20,000 for personal use.

How do I pay this to myself, and what is it called?
Distribution, dividend? Or can I only take it out as salary
or bonus (but I prefer my LLC not to be an employer at this
point with all the neccessary paperwork, just for this
irregular event). Plus there would be double taxation.

I mean, for the IRS the money in the LLC's account is
already my personal asset.

But if I just write myself a tax-free check, with "member
distribution" on it, am I not disturbing the legal
separation of personal and business assets?

Thanks,

Etienne
CA, USA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It may not be relied upon for the purpose of avoiding > << penalties that may be imposed on the taxpayer or the > << tax preparer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >