I recently bought several acres of land and I am
hoping to make some improvements to it and then divide
it and sell some of it. The process could take a
couple of years and involve various expenses. If it
all works out well in the end I hope to make some
gains on the property. Obviously, I want any gains to
be offset by the expenses I incur as I improve this
property. I don’t have a small business or LLC but I
am considering setting one up. Right now I own about 20% of the property and the bank owns 80%. I would envision this being a money drain for about 18 months and then the sale of 3 lots could bring in a sizeable profit. What’s the best way to go about this? If I set up an entity and feed it cash for operations for start up do I treat that as a loan or is there other ways to account for that?
You can go about it setting up a loan agreement between yourself and the LLC. You can have a lawyer do it for a fee. But you can also make what is called an owner contribution. I’m not sure the advantage or difference of doing it one way or another. It seems to me like just making an owner contribution would be the easiest. Hopefully someone more knowledgeable can expand on this.