I have a single member LLC which is a disregarded entity for IRS purposes. I have a new attorney who told me that when ever I make a capital contribution to the LLC out of my own pocket or transfer by Quit Claim into the LLC (it currently holds only one rental property), that I have to file or record the contribution (cash or property) with the IRS.

I reviewed IRS publication 542 and I think I DO NOT have to do this since my LLC is not being taxed as a corporation but as a disregarded entity. My accountant has not mentioned this. What say you? I have recorded the initial cash/capital contribution to the LLC in the Operating History I maintain for the LLC and when property has been transferred into the LLC in the same manner.

  • If you have an attorney or tax professional on your side, you would be best served by bringing all of these details to that professional
    – Noah
    Aug 20 '14 at 19:49

Your attorney is wrong. What he said is true for partnership/multi-member LLC, but not for SMLLC which is disregarded. From IRS perspective, quit-claiming property or transferring money between you and your SMLLC is a no-op.

You do need to maintain your own records and keep track of your own capital account, but IRS doesn't care - for them SMLLC and you are one and the same.

Generally attorneys who do not specialize in tax - don't know tax. Talk to a licensed tax adviser (EA/CPA licensed in your State) for a tax advice, not an attorney (unless it is a tax attorney).

  • @litteadv What do you mean by no-op? Jan 8 '15 at 7:39
  • I mean that there are no tax consequences.
    – littleadv
    Jan 8 '15 at 9:25

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