Your investment in the business can be documented in a variety of ways. The appropriate documentation will depend upon the type of investment (equity, debt or a hybrid structure), the type of business entity (LLC, partnership, corporation, etc), and the terms of your investment.
If your investment is an equity investment in a corporation, the corporate share registry should be updated to reflect your cash contribution and the number of shares you received. Most corporations also have a shareholder's agreement which corporate shareholders use to outline their rights and obligations amongst themselves.
If the investment is an equity investment in a partnership or LLC, you'll need to sign the LLC operating agreement and update the members' schedule to evidence your investment.
A debt investment in any structure is typically evidenced by a promissory note which is signed by you and the company. The note outlines the principal amount of investment, interest rate, payment terms and other conditions.
An investment in an business is not a tax deductible expense for the investor, nor is the cash contribution considered taxable income to the business. In certain cases where your investment becomes worthless, or the promissory note is deemed uncollectible, you may be able to write off the investment as a capital or ordinary loss.
