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Old 03-31-2016, 08:40 PM
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LLC member buyout loan closing costs

My partner and I formed a 2 member LLC to purchase rental real estate in 2011.
Last year I bought out his entire interest in the LLC using bank financing ($975K) as well as a loan from him (the exiting partner) for $432K.

We are treating the $432K as a person to person loan , so it is not on the books of the LLC, and I am taking investment interest expense on my personal 1040.

However, on the $975k loan the bank required the LLC and me to both be listed as the borrowers (the deed on the real estate remained in the name of the LLC).

Thus, am I allowed to carry this loan on the books of the LLC since they invoice us and carry the loan in the name of LLC? And what about the closing costs, loan fees, etc? I brought personal cash to the closing. I would like to amortize points, add title fees to the basis, etc on the LLC books rather than try to handle that on my personal 1040.

So I figure the journal entries for the LLC would be:

Credit Long Term Liability (to the bank) $975k
Credit paid in capital $975K
Debit assets as per the loan settlement sheet ($12K)
Credit paid in capital ($12K)

Does this all look ok?



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Old 04-01-2016, 02:07 AM
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Join Date: Oct 2010
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However, on the $975k loan the bank required the LLC and me to both be listed as the borrowers (the deed on the real estate remained in the name of the LLC).Thus, am I allowed to carry this loan on the books of the LLC since they invoice us and carry the loan in the name of LLC?========>then on the LLC book it?d be long term notes payable
If there is no loan agreement between the LLC and the owner, you,then the money would be treated by the LLC as investment funds and recorded as equity in the accounts. If there is a loan agreement between the LLC andyou, the owner , then the monies would be treated as debt funds and become a liability of the LLC in the accounts.



And what about the closing costs, loan fees, etc? I brought personal cash to the closing. I would like to amortize points, add title fees to the basis, etc on the LLC books rather than try to handle that on my personal 1040. ------->>>>>>>>yes on form 1065; Interest you pay on business loans is usually a currently deductible business expenses.as
you borrow money to buy an interest in the llc , it?s wise to seek an accountant?s help to figure out how to deduct the interest on your loan. It must be allocated among the company?s assets and, depending on what assets the business owns, the interest might be deductible either as a business expense or as an investment expense, which is more limited. You can deduct all interest the LLC pays on a loan it uses to fund the purchase of business assets or to pay operating expenses. Since LLC is subject to partnership taxation rules, each partner can deduct the portion of interest that reflects his respective investment in the partnership.



So I figure the journal entries for the LLC would be:

Credit Long Term Liability (to the bank) $975k
Credit paid in capital $975K
Debit assets as per the loan settlement sheet ($12K)
Credit paid in capital ($12K)

Does this all look ok?======>> Cash 975k will be debited for the amount received
Notes Payable 975k will be credited for the amount borrowed?;
Cash 12k for debit and capital 12k for credit



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