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Level 2

Chart of Accounts for Multiple Loans

If I loan money to my LLC multiple times, over time, for different reasons, is it okay to use one loan account in my chart of accounts?  Or should I set up a unique loan account each time I loan money in?

2 Comments
Community Champion

Chart of Accounts for Multiple Loans

You are not "loaning" money to your LLC, You are increasing equity and if you wish to repay yourself, which is never required, it is equity reduction.

 

You need a set of 3 equity accounts for each member of the LLC. Member Equity, Member Draw, Member Contribution. And make these three all sub accounts of a parent Overall Member Equity account for each member tgat you never post to but acts as a summing account.

 

So, personal money in is Member Contribution. Any and all money out to you is Member Draw. Profit or loss is passed through to your personal return and year end profit is posted to retained earnings, and then to equity on day 1 if not disbursed.

Level 2

Chart of Accounts for Multiple Loans

Hi John,

 

Thanks so much for the detailed response. 

 

I understand the concepts you outlined regarding equity and draw accounts.

 

These member loans are being used in place to equity contributions in certain circumstances.  They are well documented, secured, include a reasonable interest rate, and scheduled payments. 

 

The purpose of going through this trouble is to move some income to interest expense.  This of course is still income but avoids self employment tax on the that portion.

 

I just wasn't sure if it was necessary to split the loan account out separately in QB.  Currently, I am using a single loan account in QB, and tracking each loan individually outside of QB.

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