Can an LLC accept a cash donation?

StefanieStefanie Posts: 1subscriber
edited February 2008 in Startup Funding
We are in the start-up phase of our business and are structured as an LLC.  A mentor and trusted advisor would like to make a cash donation to our LLC to help us fund some projects and get started - this "gift" is with no strings attached (i.e. the person making the gift is not requiring a return on investment, a share of the company, or the gift to be paid back).  The only requirement is that the contributor would like a "receipt" to show for his donation.  Can we, as an LLC, accept a cash donation?  How does contribution go on our books?  What would a `receipt` look like for this donation - would it simply be a statement on our company letterhead stating the specifics of the gift donation?

Comments

  • ObsidianLaunchObsidianLaunch Posts: 7subscriber
    You need to speak with a qualified accountant... but in my experience it can not be qualified as a donation unless you are deemed a charity.  Instead it is considered a gift and must be recorded that way.  US tax law dictates the size a gift can be before it is taxed.  I believe if the gifter is a family member, the amount is limited to $12,000 before it gets taxed.
     
    Again MAKE SURE YOU SPEAK WITH AN ACCOUNTANT!
  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    Here is a brief description of the gift tax (from the IRS web site) followed by a link to the FAQ section, which may help.
     





    Gift Tax

     






    The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.
    The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
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  • armandmariusarmandmarius Posts: 0subscriber
    I had the same question when I wanted to make an automobile donation, my son works as a lawyer and he explained me everything I needed to know. I also entered the IRS website, they have a lot of useful information on their website.
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