Hello everyone. My wife and I just started a small online business. It's an LLC that we are choosing to have taxed as a Sole Proprietorship (Being married and living in a community property state, this is possible without having to go the joint venture route). We decided to each use one of our personal credit cards (2 for a total of $9k in credit) to help with initial costs: LLC Formation, new computer, phone service, etc. We decided to use Xero for bookkeeping and added both credit cards as accounts (which are treated as liabilities). We haven't had any business income (revenue) yet. It's all a loss at this point. We won't make our first dollar for another 2 or 3 months.
I'm running into an issue for how to account for these personal credit cards on the books. Each were new, never used before and have only been used for business expenses. So in that respect, it's clean and easy. Until we get revenue, we'll be putting personal money into the business bank account to pay these cards off. From what I understand, we would create "Owner Equity Invest" and "Owner Equity Withdraw" chart accounts to accommodate putting money in and taking money out.
So here are my questions:
Thank y'all so much for your time and assistance. I can't seem to find straight-forward answers to these questions anywhere.
Mike
I'm running into an issue for how to account for these personal credit cards on the books. Each were new, never used before and have only been used for business expenses. So in that respect, it's clean and easy. Until we get revenue, we'll be putting personal money into the business bank account to pay these cards off. From what I understand, we would create "Owner Equity Invest" and "Owner Equity Withdraw" chart accounts to accommodate putting money in and taking money out.
So here are my questions:
- :confused: How do we account for these on the books? Do we just treat them as if they were business credit cards? Or do we have to attribute them as some kind of loan from the members? Or as a form of contribution?
- Does using these personal credit cards solely for business expenses (none for personal) diminish the LLC protections as it ties us more closely into the business instead of being a completely separate entity with its own credit cards?
- Assuming it *DOES* diminish LLC protections, if we get a business card in a few months and pay off these personal cards, and remove them from the business completely, does that put the protections back in place or is the damage done?
Thank y'all so much for your time and assistance. I can't seem to find straight-forward answers to these questions anywhere.
Mike
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