How to Contribute Personal Money to Your LLC
If your capital contribution will be in the form of cash, making the contribution is generally as easy as making out a check from your personal funds to the LLC. State laws by default allow members to loan money to their own LLCs, and personal loan to single member LLCs, but an operating agreement that is properly adopted by the members can prohibit such a practice or establish limitations.
Examples of Capital Contributions
What is Capital Contribution?
Capital contribution is giving money or assets to a company. It increases the owner’s share. You can contribute cash, property, or services.
Types of Capital Contributions:
- Equity investments – Investors contribute money in exchange for company shares
- Debt investments – Investors lend money and get repaid with interest
- Convertible debt – Investors lend money that can later become shares
Recording Capital Contributions:
- Document initial investments in operating or partnership agreements
- Update member capital accounts when new contributions are made
- Contributions increase member equity but are usually not taxed
Withdrawing Capital Contributions:
- Members can take money out through capital distributions
- Operating agreements often limit when/how much can be withdrawn
- Withdrawals reduce member equity and capital account balances
Personal Contributions:
- Members commonly contribute personal money to fund LLC expenses
- Best practice is to open a business bank account to separate finances
Making an LLC Capital Contribution
You can deposit cash, write a check, or transfer money from your personal bank account to your LLC bank account. This money then becomes the available funds for the LLC operating expenses.
How do I Contribute Personal Money to my LLC?
You can contribute the transferred assets to the LLC as your initial capital contribution. This demonstrates your ownership interest and helps the business begin its operations, covering expenses, investments, and other financial requirements. As you transfer personal assets to the LLC, it’s essential to update insurance coverage and contracts accordingly.