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Running two businesses out of home
Posted by magdalenab on 03/04/2009 - 12:17
If there are two businesses operating out of home, one is incorporated the other a LLC, and utility expenses were paid out of a personal account how would I enter those expenses into the software? Would it first of all be split 50%? I'm not sure what kind of journal entry to make since it was not paid out of either business account, but want it to be reflected in the books. I'm very new to bookkeeping and this is one of my first clients.
Thank you
magdalena bene, bookkeeper, Pasadena
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Address the tax issue first
Your question raises a number of tax issues. Do the businesses rise to the level of a business or do the hobby loss rules apply? If a valid business, the entire utility bill cannot be allocated to the businesses. Only the portion alloted to the space that is devoted solely to the business. On a tax form you would need to complete a home office deduction form or possible set up a rental agreement for the space between the corporation and the homeowner for the space allocated to the corp business. You really need to have your client consult an experienced tax professional before proceeding because the answers turn on the facts. IRS Circular 230 requires me to inform you that any statements contained in this transmission are not intended or written to be used, and cannot be used, by you or any other taxpayer, for the purpose of avoiding any penalties that may be imposed by federal tax law.
bookkeeping and loans
Have you tried a shareholder loan to the corporation or the partnership from the owners or partner? If you do a loan and what to do a 50-50 split, remember to update the minutes in the books indicating interest rate and period for repayment. Good luck.