Borrowed money from my startup to cover personal rent - how do I record this?

Asked almost 2 years ago - Seattle, WA

First off, is this okay, that I did this?

Second, how do I record this from a bookkeeping/accounting perspective? My reasoning behind this is that I am essentially borrowing the money from my startup funding (i.e. like the company is loaning me money).

Before we received funding, I covered a lot of business expenses out of my personal pocket, with the expectation that my startup would eventually reimburse me for these expenses. I have been tracking this amount in a current liability account. Would I use this same account to record personal expenses that my startup covers?

Attorney answers (2)

  1. Collin Roberts

    Contributor Level 8

    Answered . The answer to your question depends on the formation documents of your company. Typically, in many LLC Operating Agreements, there will be a provision that allows Members to take out loans from the company. It would be wise for you to seek counsel on this matter from an attorney as well as an accountant.

  2. Robert Louis Feliciani III

    Contributor Level 13

    1

    Lawyer agrees

    Answered . Whether or not you can lend money to someone or borrow money from the company is a matter of the corporate documents. It also might involve your partners and whether they would approve of the transaction.

    A bigger problem is that there is the appearance that you are commingling business and personal funds, which may result in a piercing of the corporate veil.

    Now as for the accounting, you should check with your accountant. I don't believe you will be able to write the loan off.

    This answer does not, nor is it intended to, create an attorney-client relationship or constitute attorney... more

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