We'd like the company to reimburse the funds when profitable.
When you open a bank account for your corporation, you'll need to make an initial deposit with your personal funds. A shareholder's initial contribution can be recorded as either debt or equity. If you want to record the initial contribution as equity, you would debit cash for the amount deposited into the bank account, and credit an equity account, such as “shareholder’s equity” or “capital stock”. Alternatively, you can record the deposit as a shareholder loan. Debit cash for the amount deposited, and credit a liability account, such as “Loans from Shareholder”. There are also methods to bifurcate the contribution by recording a contribution as a combination of debt or equity.
I am well-versed in taxes, business consulting and teaching best practices, and I have been in this field for many years.
To answer your question, you can log the funding to the C-Corp as a Loan from Owners (liability account). This would require a loan agreement, and the agreement must cover details of the loan to the company including a fair market interest value to be paid back to the owner. I have an excellent template for this type of agreement you would need to draft. With this documentation and treatment of the loan, when you distribute money from the company back to the owner, it would not be considered dividends. Therefore, it would not be taxable to pay the owner back his/her funding.
I'd love to discuss this in more detail over a call. This is a pretty complex subject with the setup and ongoing treatment so I'd be happy to go into more detail with you!
For initial funding you can follow the below mentioned steps:
1)Start by creating a new equity account
2)Record the initial funding transaction
3) When the company becomes profitable and you want to reimburse the owner, you can record the reimbursement transaction.
By following the above steps you can record the initial funding of a C-Corp with funds from the owner's personal account in QuickBooks.
