Transfering money from my existing LLC to start a new LLC

ellochewy · ‎March 04, 2024

I'm starting a new LLC and would like to take, let's say, $10,000 from my current LLC to fund the operations in the new LLC.

How would I categorize these transactions in the books?

From what I understand, I can do an Owner's Contribution on the new LLC side and an Owner's Distribution on the old LLC side. However, the distribution on the old LLC side would be taxed, right? If so, is there a better way of going about this?

Thanks!

Rainflurry · ‎March 05, 2024

@ellochewy

How is each LLC treated for tax purposes? Single-member (sole proprietorship), S-Corp, or ????

ellochewy · ‎March 05, 2024

They're both treated as S-Corps for tax purposes, thanks!

Rainflurry · ‎March 05, 2024

@ellochewy

Are you 100% owner of Current LLC? Distributions made from an S-Corp need to be made pro rata to ownership percentages. I will assume you own 100% of shares in Current LLC. Distributions are not taxed as long as you have adequate tax basis. If your 2023 return is complete, you can find your tax basis on Schedule M-2. Undistributed income previously taxed can be distributed tax-free. Distributions in excess of tax basis are taxed as a capital gain.

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Transfering money from my existing LLC to start a new LLC