USA No receipts for reimbursements


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A client started an LLC in 2018. An Angel investor paid for his business Filing, website, website hosting, and other general expenses. The initial understanding was that he would be an equal partner, and get reimbursed for all his expenses. Only my client’s name appears on all business filings, bank account, etc. He (Angel) has been asked numerous times both orally and writing to submit receipts and invoices, but he has refused. Now, he says that he doesn’t want to pursue the relationship any further with my client, and the client should just keep everything for himself. My client wants to pay him back in full as originally agreed, and file all proper tax filings. What should he do? Should he make a goodwill estimate of the expenses and just write the investor a check? It is a real mess.
 

bklynboy

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Why pay it back if he does not want anything? Since the company never incurred these costs I don't see why you need to include these in your tax filings assuming all the legal paperwork is in order for the LLC. If you really think at some point he may come after the LLC for repayment, set up a receivable using your best estimate what he is owed but I would not pay anything without proper invoices or receipts.
 
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J

John Baker

In addition to what bklynboy mentioned, your business filings (which business filings you didn't mention) you should have had a legal agent - attorney in the process. Going into business without counsel is a risky venture. Your protection for you business interests, in
addition to personal assets, is at risk now. Be mindful of the ability of another party initializing a legal entity on your behalf. Pledging
debit and other functions, without your knowledge is a handful to wrestle with.
I had a family business that had sour grapes shortly after their first year in business and the "he said - she said" came down to a
shouting match every time they sat down together. Their mistake was not incorporating a competent attorney, familiar with their membership and the industry norms that they had to deal with at the outset.
 

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