I am a member of a two member Partnership LLC that was started in late 2018. My partner was to provide the startup money and I was to provide the sweat equity. I ended up spending my own money as well to get the business up and running. In 2020 I was able to begin paying myself back for business startup costs by making a monthly payment on my personal credit card from my business account (two different personal cards in total). I am preparing my books for filing 2020 taxes and I am still unsure of how to record these payments to accurately reflect where the money is going. After research I have found what I think is the best way but I am still looking for further confirmation that I am on the right track. I expect to:
1) create a journal entry dated 2018? where I will record line by line the appropriate category of my initial purchases that will total to my original investment in my business (lets say $10,000.00).
2) add a final line using the category of Owner's Equity with the total amount; save.
3) create an expense paid to the Owners Equity account from the business checking account, one for each credit card payment to be matched. I plan to continue this until the balance reaches $0.00 and I fully recoup my investment. Once this is done, I would do the same for my partner and his investment.
That way works, but I prefer to use equity sub accounts, drawing and investment
For a company taxed as a sole proprietor (schedule C) or partnership (form 1065), I recommend you have the following for owner/partner equity accounts (one set for each partner if a partnership)
[name] Equity (do not post to this account it is a summing account) >> Equity >> Equity Drawing - you record value you take from the business here >> Equity Investment - record value you put into the business here