Why keep separate books if the IRS ignores the LLC?
Because the law does not ignore it. The LLC's liability protection depends on treating it as a separate business, with its own account and records. See business account vs personal account. Separate books also make the return a matter of reading totals off a report.
How do you record money between you and the LLC?
| Transaction | How to record it |
|---|---|
| You put money into the LLC | Owner contribution, an equity account |
| You transfer money to yourself | Owner draw, an equity account |
| The LLC pays a personal bill | Owner draw, not an expense |
| You pay a business cost personally | Owner contribution, and the business expense |
Draws are never an expense and never reduce profit. See how to pay yourself from an LLC.
Whether to put money in as a contribution or a loan is covered in capital contributions vs loans.
Draws and contributions appear in equity on the balance sheet. See how to read a balance sheet.
How should the books be set up?
Open a business account
In the LLC's name, used only for the LLC.
Choose software
Connect the account for automatic transaction feeds.
Set up a short chart of accounts
Matched to Schedule C lines. See how to set up a chart of accounts.
Record the opening contribution
The first money you put in, as owner equity.
Reconcile monthly
How do the books feed the tax return?
For a US owner, the LLC's profit and loss statement becomes the owner's Schedule C. For a foreign owner, the books show whether there is effectively connected income, and the equity accounts give the contributions and distributions reported on Form 5472. Keep a transfer log with dates and amounts, because Form 5472 needs them.
Should the LLC set aside tax?
The tax is the owner's, not the LLC's, but a simple habit helps: move a percentage of each month's profit into a separate savings account for the owner's quarterly payments. See how much to set aside for taxes.
What are the common mistakes?
- Using the business account for personal spending.
- Recording draws as wages or expenses.
- Paying business costs personally and never recording them.
- Foreign owners not logging transfers, leaving Form 5472 incomplete.
See also common bookkeeping mistakes.
Want your LLC's books kept for you?
We keep your LLC's books monthly, track owner transactions, and prepare Schedule C or Form 5472 from them at year end.
Questions people ask
Does a single-member LLC need its own bookkeeping?
Yes. Even though its profit is usually reported on the owner's return, separate books support liability protection and an accurate return.
How do I record money I take out of my single-member LLC?
As an owner draw in equity, not as an expense or wage.
What if I paid an LLC expense from my personal account?
Record it as the business expense and an owner contribution.
What records does a foreign-owned single-member LLC need for Form 5472?
A log of every transfer between the owner and the LLC, with dates and amounts.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IRS: About Schedule C (Form 1040)
- IRS: Instructions for Form 5472 (Rev. December 2024)
- IRS Publication 583: Starting a Business and Keeping Records
Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.
Related guides
More in Bookkeeping
This guide is general information. It is not tax or legal advice for your situation.