Purchased equpment with personal loan to start business
Hello! Please forgive and direct me if I am in the wrong area of the forums! I am learning Quickbooks Desktop Pro. The community has been great help!
I am looking for advise on the following situation: I purchased an excavator for my business, as I was starting it. I got a personal loan from my bank, which I later opened a business checking account with the same bank. Since my loan to pay for the excavator was a personal loan, we paid to the machine and own it, now just pay back the personal loan. I have been transferring the payments from my business checking account to my personal loan, and I am wondering what I should do to start recording these transactions. I "think" I can't create a loan for the machine, since I cannot loan to myself... right?
Should I just enter this machine as a fixed asset since we own it and classify the bank feed transfers as owner draw?
To me, the last part stands true - it is in the very nature of a small business to blur the lines between their personal and business money flow when the need arises. Since your situation is a little more complex than what the guide entails, that method may not apply.
I've found a similar question from the past where @Regina_Lend_A_Hand_Accounting shared some insight on this topic. Regina, does their approach sound like the proper way of recording the matter?
Cheers to a safe and successful week ahead, everyone.
It sounds like you have made an "Equity Contribution" to the Company as a single member LLC. This is money that as a member you have contributed to the LLC that the company does not have to pay back because it increased your ownership interest in the company considering the original equipment loan was for a fixed asset of the company. If you were going to pay back the loan, it would be a loan from a shareholder to the company, and therefore a liability of the company. There is no limit to the amount of money a member can loan or contribute to its own company. The equipment is a fixed asset of the business and needs to be recorded as such on your Balance Sheet.
Re: Purchased equpment with personal loan to start business
I paid for the machine in full, since I took out a personal loan. I am paying the monthly payments by transferring the monthly amount back to my personal checking when the payment comes out.
If I understand what your saying correctly, I am correct in entering the machine as a fixed asset for the purchased amount. I am still hung up on how to classify the monthly payment transfers for the personal loan... classify these as a equity investment or owners draw?