Capital Contributions

(Missouri)

Would it be sufficient to write "capital contribution" or "start up" on the memo line of your check from your personal account in terms of documentation or should you draw up a contract in terms of start cost and ongoing company expenses until you make a profit?

Answer

If this is a single member LLC, then I you can probably get away with simply writing "capital contribution" on the check for startup money.

If you are a member of multi-member LLC, you need to have an operating agreement and make sure that it addresses what happens to your capital contribution to protect your rights vs. the rights of the other members in the LLC to a return of the capital contribution.

For example, say you make a $10,000 capital contribution to the LLC and you have 3 fellow members. You are all equal 25% owners.

Suppose the LLC makes a $20,000 profit in year 1.

How is that allocated?

Does each member get $5,000?

Do you get your $10,000 back first, and the remaining $10,000 is divided 4 ways? (eg. you get $12,500 and the other three each get $2,500).

Some other method?

How your capital contribution is treated is determined by your operating agreement.

If you don't have an operating agreement, and there are multiple members in your LLC....get one.

If you can't afford/justify the price of an attorney to draft one, Legalzoom offers custom operating agreements at a reasonable fee (less than an hour with an attorney).