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Thread: Personal expense as an LLC

  1. #11
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    Quote Originally Posted by SumpinSpecial View Post
    But really it depends on how their personal banking is set up. If they co-own their accounts and both have signatures on file so that they can both sign checks and withdraw money, then you can make him the employee and put his name on his salary checks and she can still sign and deposit them.
    No, you should't do that. Yes, they would get paid the same, but it would mess up their taxes and your bookkeeping. Her salary needs to be recorded under her SSN, and not in her husband's name. This is the type of shortcut that results in very little times saving and huge headache down the road.

    Also, owner equity withdraws need to be to the owner and not to a relation of the owner. If she is a part owner, then write the checks to her, if not write them to him.

    Just do it right in the first place.
    Last edited by nealrm; 01-29-2017 at 05:18 PM.
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    She techincally doesn't work there anymore, she hasn't for the past two years. This is the way they have always done it, and I know it is not right. She would also take checks that customers paid for their invoices with and she would deposit them right into her personal account. She doesn't do that now, but i'm still fixing it from last year.

    I'm going to have the checks made out to the owner and mark it as his salary, is it fine however for her to take them and deposit them then?

    When they file for taxes, they always file together, she has never actually took a salary the entire time she actually worked there.

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    What a mess!!!

    What is done is done, there is not really anyway you can undo it but you may be able to clean it up. At this point you need more help than what can reasonable be provided here. I suggest you talk with an account. Once the mess is cleared up, you should be able to move forward.

    If you hand the check to him or mail the check to his address, it is no longer your worry. How they do their finances is up to them. How they file taxes is up to them. You just need to worry about the business.
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    Andrew, I want to clear up one thing -- there are two different types of payments that might be made to the owner. I see you using the word "salary" but I am not sure you are understanding what it really means in this context.

    When they (the accounting references you've looked at) say that the owner of the corporation must receive a salary (if he is providing services to the business), what they mean is that the owner must be treated as an employee and the salary he receives is the compensation for the services he is providing to the business. Since he is now an employee of the corporation, the business must withhold federal (and state?) income taxes and deduct social security and medicare, and must pay it's share of social security and medicare as well as unemployment and worker's comp insurances. This is all done through a payroll process -- the same payroll process that you would use for the other employees of the business. These payments would be charged to the appropriate "wages and salaries" expense account.

    If you are not running the payments to the owner through payroll, then they are the second type of payment -- an owner's draw, or distribution -- regardless of whether you are calling it "salary" or not. These payments involve owner's equity, not an expense account.

    The owner can receive both types of payments from the business. The IRS says that an owner who works in the business just has to receive a reasonable salary (or wage, run through payroll process) first before taking any distributions (this is because there are certain tax advantages to taking distributions rather than wages or salary, and they want to make sure that all the appropriate taxes are being paid).

    If the owner is no longer involved in the day to day operations of the business, does not work for or in the business anymore, then he does not need to be paid a salary (or wage, run through payroll) and instead all payments can be in the form of distributions.

    As far as the wife goes, if she is not a shareholder in the business (or "member" of the LLC), and does not work for the business, then the checks should not be made payable to her. If the checks are payable to the owner, but she is the one who picks them up, that is fine and not a concern. How they handle their personal money is up to them.

    Hope this helps clarify things.....

    (I remember your posts from a year to two ago; sounds like some progress is being made. Good Luck!)

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    Thank you tallen that really cleared it up. So at this point it will be fine to just continue paying him with owner draw, but have the checks wrote out to him and marked in quick books that they are going to him

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    I talked to an accountant today and got it all straightened out, however I did forget to ask one thing. The owners wife for the first couple months of last year would take some of the checks of invoices that were paid, so now I have invoices marked as paid in quickbooks, but now that i'm reconciling last year, what am I going to match those transactions with. They were never deposited in our bank, so I am going to have quite a few that were never match up once I reach the end of the year.

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    Make a cash account and deposit the checks into it. Then do owner withdraws from that account in the same amounts.
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