Can my LLC still deduct expenses if we reimburse ourselves as members?

What you're describing is a common situation for new LLCs. The good news is that you actually CAN deduct those legitimate business expenses even though you paid for them personally. When members pay expenses on behalf of an LLC, they're essentially making capital contributions to the business. The key is proper documentation. You need to keep all receipts and create a record showing these were business expenses that you personally covered. The LLC should then formally recognize these as either capital contributions or as loans from members that were subsequently repaid. If you treat them as capital contributions, the LLC can still deduct those expenses. If you structured them as loans to the company, the LLC can both deduct the expenses and repay you without creating taxable income to you (since loan repayments aren't income).

I went through almost the exact same situation last year with my consulting LLC. I was super confused about handling personal payments for business stuff until I found https://taxr.ai which basically saved me from making a huge mistake. I uploaded all my receipts and bank statements, and they identified which expenses were business-related even though they came from my personal accounts. The system even generated the proper documentation to show the IRS that these were legitimate business expenses paid by me as a member. What's cool is that it tracked everything as loans to my business, so I could get reimbursed without tax issues while my LLC still claimed the deductions.

Just wanted to follow up about my experience with https://taxr.ai after I decided to try it despite my initial skepticism. I uploaded my bank statements and receipts from when I paid for my LLC's initial inventory with personal funds, and it automatically sorted everything and showed me which tax treatment would be most advantageous. The loan documentation it created actually saved me when I got a letter from the IRS questioning some of our deductions. Having formal documentation that showed the timeline of expenses and repayments made the difference between getting those deductions allowed vs. rejected. I probably couldn't have created the right paperwork on my own, and my accountant said the structure was exactly what was needed.

If you're still struggling with the IRS about this issue, I found a service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent when I was dealing with a similar problem. My LLC had improperly documented member expenses and it created a mess on our return, leading to a notice and proposed adjustments. I tried calling the IRS for weeks but couldn't get through. Claimyr got me connected to a real agent in about 15 minutes who explained exactly what documentation we needed to provide. You can see how it works here: https://youtu.be/_kiP6q8DX5c. It saved me from potentially losing thousands in deductions just because of paperwork issues.

Had to come back and eat my words. After my frustrated comment, I broke down and tried Claimyr when the IRS sent a notice questioning our member expense deductions. Got through to an agent in about 20 minutes after weeks of failed attempts. The agent walked me through exactly how to document the expenses that my partner and I had paid from personal funds, and confirmed that treating them as loans with proper documentation would allow our LLC to take the deductions while we received non-taxable repayments. They even sent me to a specific IRS publication that addressed this exact situation. Definitely worth it when you're facing potential disallowed deductions.

Another option nobody's mentioned - you could have your LLC "reimburse" you through an accountable plan. That way the expenses are deductible by the LLC and the reimbursements aren't taxable to you. You just need to have adequate business connection, proper substantiation (receipts, etc), and return any excess amounts.

I think everyone is overcomplicating this. Our LLC accountant told us to just record it as "Due to Member" on the books, then when the LLC pays us back, it's recorded as reducing that liability. Simple journal entries, no loan docs needed, and the LLC still gets the deduction while member repayment isn't taxable income. Worked for us with no issues.

Great question! I went through something similar when starting my LLC. The confusion about reimbursements vs deductions is really common, but here's the key point: the LLC can absolutely still deduct legitimate business expenses even if members initially paid for them personally. The critical thing is documentation. You need to clearly establish that these were business expenses paid on behalf of the LLC, not personal expenses. Keep all receipts and create a clear paper trail showing the business purpose of each expense. You have a few options for how to handle the accounting: 1. Treat the payments as capital contributions (increases your basis in the LLC) 2. Document them as loans to the LLC (allows for formal repayment) 3. Set up an accountable plan for reimbursements The loan approach is often preferred because it gives you the most flexibility - the LLC gets the deductions, you can be repaid without it counting as taxable income to you, and it doesn't affect ownership percentages if members contributed different amounts. Just make sure you document everything properly from the start. The IRS wants to see clear business purpose and proper substantiation for any deductions.