Hi, I co-own an LLC with my partner. We have expenses to the company
that we pay for with our own credit cards... since it's an LLC and the
taxes are mixed with our personal taxes, should we bother doing
personal expense reports that we submit and are reimbursed for, or
should we just note expenses in Quickbooks but not actually move any
money in/out of the business bank account?

Howdy Eric,

First, a reminder of the "Important Disclaimer: Answers and comments provided
on Google Answers are general information, and are not intended to substitute
for informed professional medical, psychiatric, psychological, tax, legal,
investment, accounting, or other professional advice."

As a partner in a LLC, I am well experienced with the "pain" of doing expense
reports and the reimbursement process.  If you do away with the reports, the
way to handle it is to then, in turn, claim those "unaccounted" expenses on
your all-too-familiar Schedule E (Supplemental Income and Loss.)

You will need the free Adobe Acrobat Reader to read the original of the
following.  If you do not have it, you can download it from Adobe.
http://www.adobe.com/products/acrobat/readstep2.html

From the Internal Revenue Service (IRS) 2003 Schedule E instructions.
http://www.irs.gov/pub/irs-pdf/i1040se.pdf

"You may deduct unreimbursed ordinary and necessary expenses you paid on
behalf of the partnership if you were required to pay these expenses under
the partnership agreement."

Doing it on the Schedule E seems to be more of a pain than doing the expense
reports and getting reimbursed, which is why I continue doing the reports,
etc. to this day.

By the way, I think you might have confused the Schedule C - (Profit or Loss
From Business - Sole Proprietorship) with the Schedule E in your comment.

The side effect is that I am very organized about making sure the expenses
get on the books, and both my partner and I know exactly where every penny
goes.  I also think that if you ever get audited by the IRS, you will both
be extremely happy that you went the more cautious route.

Both ways, you have to keep records, but doing the expense reports, etc.
will make sure everything is accounted for, and done correctly.

If you need any clarification, feel free to ask.


Search Strategy:

Personal experience and referred to the Schedule E instructions.

Looking Forward, denco-ga - Google Answers Researcher

perfect. thanks.

It may be help to tell what the leters LLC stand for and the location
of your business. Does that mean you do not file a schedule C? Perhaps
you are not filing USA taxes? My guess is you can do it either way or
even mix methods, However, some proceedures are more likely to alert
the The IRS computer than others. If you choose to not tranfer money,
you should not depend entirely on Quickbooks as total loss of data is
possible, so you need to be able to reconstruct the important details,
in event of computer failure.  Neil

Sorry, I thought it was obvious for a message board of accountants ;-)
"LLC" = Limited Liability Company (vs. an S corp or a C corp, or
partnership or sole proprietorship)... it's a US business structure.
LLCs are interseting in that all company income and expenses are
recorded as a schedule C for each member ("shareholder," though there
are no "shares" per se) and the profit carries through to each
person's personal income tax. The LLC itself doesn't file a return.

best
Eric

Thanks for the 5 star rating, Eric.

Looking Forward, denco-ga - Google Answers Researcher