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Deadeye1985
October 28, 2024
Question

Loans from Member to Business Account and Loan Repayments to Member from Business Account

  • October 28, 2024
  • 1 reply
  • 0 views

All,

OK, I will admit I am a QB novice so here is the question. Should a loan be categorized as a Long-Term Liability or Equity and should repayments of the loan or loans be categorized as Equity or Long Term Liability. 

On my QB my CPA has set it up as Loans from Personal Funds = Long Term Liability but also the Repayment of Personal Loans as Long-Term Liability as well. Is this correct?

 

Also, further down on the List of Accounts, there are two "line items" Loan from Personal Account and Loan to Business Repayment. Both are categorized as "Expense".

 

Not knowing anything about QB I am wondering if this is correct because it does not look right to me but I am not a CPA or QB professional. Please Advise. Thanks.

 

1 reply

Rainflurry
Rainflurry
October 28, 2024

@Deadeye1985 

 

"On my QB my CPA has set it up as Loans from Personal Funds = Long Term Liability but also the Repayment of Personal Loans as Long-Term Liability as well. Is this correct?"

 

If it was truly a loan to the LLC (as opposed to an equity contribution) then, yes, it should be a liability.  The principal portion of the repayment is assigned to a liability account as well.  The repayment account is generally the same liability account as the original loan account but there's nothing wrong with having a separate liability account (a contra account) used for the repayments. 

 

"Also, further down on the List of Accounts, there are two "line items" Loan from Personal Account and Loan to Business Repayment. Both are categorized as "Expense""

 

I'm guessing this is for the interest expense portion of the loan repayments.  For this to be considered a bona fide loan, the LLC needs to pay the member interest.  

  

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