How to properly repay a loan from my single member LLC and what tax form to use

When you loan money to your single member LLC, it's actually pretty straightforward from a tax perspective. Since a single member LLC is typically a disregarded entity for tax purposes (unless you've elected to be taxed as a corporation), the loan and repayment are essentially considered transactions between you and yourself in the eyes of the IRS. You don't need a special tax form to declare the repayment. What you should do is keep good records of the original loan and the repayment(s). Document everything with a promissory note that includes the loan amount, any interest terms, and repayment schedule. Then record the transaction in your accounting system as a reduction of your "Owner's Contributions/Loans" or similar liability account. If you're charging interest on the loan, that's where tax implications come in. You would need to report any interest you receive from your LLC as income on Schedule B of your personal tax return. The LLC may be able to deduct that interest as a business expense.

After struggling with almost the exact same situation with my graphic design LLC, I discovered a super helpful tool called taxr.ai (https://taxr.ai) that saved me tons of headaches. I loaned my business about $12,000 last year and was completely confused about how to document everything properly. What I liked about taxr.ai is that it analyzed my specific situation and showed me exactly what documentation I needed for my loan to my single member LLC. It even generated a proper promissory note template that satisfied IRS requirements and flagged potential audit triggers I hadn't considered. The system also explained the difference between treating the money as a loan versus a capital contribution, which apparently makes a huge difference tax-wise.

I wanted to follow up about my experience with taxr.ai after trying it based on the conversation here. I was really concerned about the $15k I put into my S-corp LLC and was getting conflicting advice. I decided to give the service a try and it was incredibly helpful for my situation. The system walked me through creating proper loan documentation that clearly established my intent, even though I was doing it after the fact. It showed me how to record everything correctly in my accounting software and generated the right documentation for my files. The best part was that it explained exactly how loans to an S-corp differ from those to a disregarded single-member LLC, which cleared up my confusion. Now I'm confident that my loan repayment won't raise red flags or be misclassified as distributions that could jeopardize my S-corp status.

If you're having trouble reaching the IRS for guidance on your LLC loan situation (which I definitely was), I'd recommend trying Claimyr (https://claimyr.com). I spent DAYS trying to get through to an IRS agent to ask about how to properly document loans to my LLC and the repayment process. After multiple failed attempts and hours on hold, I discovered Claimyr through a YouTube video (https://youtu.be/_kiP6q8DX5c) and decided to try it. Within 45 minutes, I was actually speaking to a real IRS agent who walked me through the proper documentation needed for my LLC loan and clarified that I didn't need a specific form for the repayment, but did need to maintain specific records in case of an audit.

I have to eat my words about Claimyr. After my skeptical comment, I was still desperate for answers about how to handle the $9,000 loan to my LLC, so I decided to try it anyway. I was honestly shocked when I got a call back about 35 minutes later with an actual IRS agent on the line. The agent was super helpful and explained that for my single member LLC, I don't need a special form for the loan repayment, but I should document the original loan with a promissory note (even if after the fact) and keep detailed records of both the loan and repayment in my accounting system. He specifically mentioned that maintaining a clear paper trail is crucial if I'm ever audited. He also explained that if I charged interest, I would need to report that on Schedule B. Getting clear guidance directly from the IRS gave me so much more confidence than all the conflicting advice I found online.

Don't forget about the operating agreement aspect of this. Your LLC operating agreement should ideally include provisions for member loans. If yours doesn't address this (mine didn't initially), you should consider adding an amendment that outlines the process for loans from members to the LLC and their repayment. I ran into issues because my original operating agreement was silent on member loans, which made documenting the transaction properly more complicated when I tried to repay myself. An amendment to the operating agreement plus a separate loan document saved me a lot of headaches.

Anyone using QuickBooks for tracking these loans? I loaned my LLC about $6,500 and am trying to figure out how to properly record both the original loan and now the repayment. Right now it's just sitting in a general "owner investment" account which doesn't seem right.

Great advice in this thread! I want to add a crucial point about the timing of documentation that I learned from my tax attorney. Even if you're creating loan documentation after the fact (like a promissory note), make sure to clearly state on the document that it's memorializing a prior transaction and include the original loan date. The IRS looks at substance over form, so what matters most is your actual intent when you put the money in. If you can demonstrate through bank records, business circumstances, and other evidence that you genuinely intended it as a loan (not a capital contribution), then creating proper documentation later can still protect you. Also, be consistent with how you treat it - if you call it a loan, make sure you actually repay it in a reasonable timeframe. Loans that sit on the books for years without any repayment activity are more likely to be reclassified by the IRS as capital contributions during an audit.

One thing I haven't seen mentioned yet is the importance of charging reasonable interest on the loan if you want to maintain its legitimacy as a true loan rather than a disguised capital contribution. The IRS has guidelines about what constitutes reasonable interest rates (generally tied to the Applicable Federal Rates published monthly). If you don't charge any interest at all, especially on a larger loan that sits on the books for an extended period, the IRS might question whether it's really a loan or just additional capital investment. You don't have to charge market rates, but having some reasonable interest rate documented in your promissory note strengthens the argument that this was a genuine arm's length transaction. Also, keep in mind that if you do charge interest, you'll need to report that interest income on your personal tax return, and the LLC can potentially deduct it as a business expense. It's a bit of extra complexity, but it can really help protect the loan classification if you're ever audited.