I will be spending money on marketing, supplies and other things, using a personal credit card, and I also may have someone else using theirs. I have a single member LLC, newly formed, with no business credit card. I need to know how to document this so I can pay myself or the other person back for any money spent on LLC things, using a personal; credit card. I don’t want any issues with co-mingling funds, but I need this money paid back from my LLC to the person, or myself…who uses their personal credit card to pay for LLC business. Thanks in advance for any advice.
All you can really do is mark the receipt as business and save it. Pay those business expenses off the credit card with the LLC’s check book.
For instance if you spent $100 on office supplies on your credit card and another $500 on clothes. Write a check to the credit card for $100 from the LLC & a personal check for the $500.
NO NO NO
paying a personal credit card with LLC funds is COMINGLING!
Never EVER comingle funds. This is the first thing an atty will seek to break the asset protection of the LLC. And, it’s the most common mistake. LLC’s only offer protection if they are used properly, otherwise what’s the point?
Do everything just like it’s some other company you work for. If you pay for an expense personally, submit an expense report to the co for reimbursement. The expense report with attached receipts is the LLC’s receipt.
Likewise, if you want cash, have the LLC write you a check that you deposit into your personal account. Then make your personal purchases from your personal account.
everything should be at “arms length”.
If it legit business expense I was advised by my pro’s to pay cc direct from llc, apparantly others are told this also as found below in Business Week - Feb 05 (i believe!)
Don Lucove, of Lucove, Say & Co. in Calabasas, Calif., is one such accountant, and he says he often sees startup clients in your position. “We advise [that they] advance funds to their businesses and have the business reimburse the partners for these expenses,”
Affordability should not be an issue for you and your partners, since you obviously have personal funds to pay for these expenses out-of-pocket. Rather than do that next time, simply loan funds to the LLC to cover these kinds of expenses. “Payment by the LLC directly to the credit-card company (assuming you’re charging these expenses on a card) is the best suggestion I can provide,” Lucove says.
My interpretation from what I have read and been told by my pro’s i have seeked out:
Commingle simply means to mix 2 or more
When operating an llc my interpretation of commingling as described by my pro’s is PAYING for business AND personal expenses from the llc operating account. Just because a receipt is turned in for reimbursment whether it is from you personally or from a credit card or from the man in the moon is irrellevant as long as the PAYMENTS for such items are not comingled ie. paying for personal & business items out of 1 account. Of course such items must meet the IRS definitions of legitimate business expenses also to be allowed. just my 2 cents and thats why we all have lawyers or should. Just a note tho…I do not charge anything to my cc and pay for it with my llc check that does not have my business name on it such as my 800#, website, etc…ya know…just in case.
Guess the answer is …seek you own lawyer’s advice who will represent you based on his interpretation of the laws regarding this matter.
“We advise [that they] advance funds to their businesses and have the business reimburse the partners for these expenses,”
advance funds to the business and have the business reimburse you. do NOT pay personal bills from the LLC account.
comingling is mixing business with personal. it allows an atty to claim (and win) that the business is just an “alter ego” of yourself personally and not a “seperate business”.
a personal credit card is a personal expense, regardless of what the charge is for. you wouldn’t expect your employer to write a check directly to your credit card company, would you? if you want a credit card, apply for one in the LLC’s taxpayer ID number.
This is what I am specifically going to do…loan my LLC a certain amount of money from me to them, with a promissory note to make it a legal transaction.
Now, hypothetically, I use my personal credit card…or I have someone else use theirs, for such things as business cards, fax machine, postcards for direct mailing, etc…lets say the cost for each respecively is $50, $300, and $250. Can I simply submit an expense report detailing the expenses, and the receipts, and have my LLC reimburse me for the money that was spent?
I just want to make sure I don’t have any co-mingling issues, as I have read that is one of the main things new investors do wrong.
Thanks for the previous input.
you are correct.
also, if you loan money to the LLC, document it with a promissory note, reasonable interest, make regular monthly payments back to yourself, the whole deal.