Single member LLC taxed as S Corp

Viani · ‎March 10, 2022

Hi,

I just changed from a sole proprietorship to single member LLC taxed as S Corp. How do record these (what journal entries?):

1. Money I take to pay for myself

2. Income tax payment

3. Estimated income tax

4. Money reimbursement to myself when I used personal credit card for business expense / inventory (not often but it happens).

Thank you

Rustler · ‎March 11, 2022

1. You not longer can do that, unless you book it as a loan your yourself, there is no equity drawing in an S-corporation. You can take periodic distributions, but be careful, all shareholders must be paid the same and if a distribution drives your shareholder value below zero it will be subject to income tax.

2. An income tax payment is a personal thing, it does not belong in the business books. An S-corp is a pass through entity and does not pay corporate taxes to the IRS

3. Estimated income tax payments are also a personal thing and should not be in the business books

4. Money you use for the business that is personal, is a loan to the business, and must be paid back.

View solution in original post

Rustler · ‎March 11, 2022

1. You not longer can do that, unless you book it as a loan your yourself, there is no equity drawing in an S-corporation. You can take periodic distributions, but be careful, all shareholders must be paid the same and if a distribution drives your shareholder value below zero it will be subject to income tax.

2. An income tax payment is a personal thing, it does not belong in the business books. An S-corp is a pass through entity and does not pay corporate taxes to the IRS

3. Estimated income tax payments are also a personal thing and should not be in the business books

4. Money you use for the business that is personal, is a loan to the business, and must be paid back.

Rainflurry · ‎March 11, 2022

@Viani

In regard to #4, you can treat it like a loan but you can also record it as an owner's equity contribution or simply reimburse yourself.

jakelem21 · ‎July 27, 2023

So, if I paid a total of $10k over the year that were personal expenses from my s Corp business account, I can transfer $10k from my personal to my business account and book it as a “reimbursement”? Is the other option booking it as an “owners equity contribution” the same as booking it as a “personal withdrawal” in quickbooks self employed?

MirriamM · ‎July 27, 2023

Hi there, @jakelem21.

If you're using QuickBooks Self-Employed (QBSE), it helps you record your self-employed income and expenses, track mileage, and prepare your Schedule C tax form. It's also designed for sole proprietorships and only works for sole proprietors (or LLCs taxed as sole proprietorships). To know the basics of QBSE, check out this article: Overview of QuickBooks Self-Employed.

However, if you're using other QuickBooks version, I recommend consulting a tax professional or your accountant. They can provide more expert advice in dealing with this concern.

If you have any other concerns in managing your transactions in QuickBooks, feel free to leave a comment below. We're here to help. Take care always.

jakelem21 · ‎July 28, 2023

@Rainflurry If you could provide additional clarity to my response that would be greatly appreciated as QB replied with a standard message. Thank you!!

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Single member LLC taxed as S Corp