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How to Record an Owner or Shareholder Contribution

Explains the two ways an owner or shareholder can contribute money to a business — as a permanent equity contribution or as an owner/shareholder loan — and how to record each correctly in QBO via the bank feed.

A capital contribution is money that an owner or shareholder puts into the business out of personal funds, to fund operations, cover a cash shortfall, or capitalize the company. It's not revenue, and it's not necessarily a loan. It increases the company's equity (or creates a liability, depending on how it's structured).

What You'll Need

  • Access to QuickBooks Online
  • The amount contributed and the date
  • Confirmation of how the contribution is structured (equity contribution or owner/shareholder loan, see below)

Two Ways to Contribute Capital

Before recording anything, confirm with your NCO advisor how the contribution should be classified:


Option 1: Equity contribution (paid-in capital)

For corporations: the shareholder receives additional shares or the contribution is recorded directly to equity. This is a permanent investment, the company doesn't owe it back.


For sole proprietors and partnerships: the contribution goes into the owner's capital account. Same principle, it's equity, not a loan.


Option 2: Owner/shareholder loan (credit balance)

The owner or shareholder lends money to the business. The company owes it back. This is a liability (the business owes the contributor), not permanent equity.


For small contributions and day-to-day funding, loans are more common because they're simpler and reversible. For significant capitalization or bringing in an investor, a formal equity contribution is more appropriate. Your NCO advisor will recommend the right approach.

Normal Procedure

Recording an equity contribution (corporation)

  1. The contribution arrives in the business bank account (via deposit from your personal account).
  2. Go to Transactions > Bank transactions and find the deposit in the For review tab.
  3. In the Category field, select the Share Capital (or Paid-In Capital) equity account. Ask your NCO bookkeeper to confirm the correct account name for your QBO setup.
  4. Save.

The cash is now in the business account and the equity section reflects the shareholder's invested capital.


Recording an equity contribution (sole proprietor or single-member LLC)

  1. Find the deposit in the bank feed.
  2. In the Category field, select the Owner's Capital equity account.
  3. Save.

Recording an owner/shareholder loan (money lent to the business)

  1. Find the deposit in the bank feed.
  2. In the Category field, select the Owner Loan or Shareholder Loan liability account.
  3. Save.

This records the cash in the business and creates a liability. The business owes the contributor back.

Abnormal Procedures

You've contributed money over time without documenting whether it's equity or a loan.

This is common with early-stage businesses where the owner funds everything personally. Work with your NCO advisor to review the history and decide the right classification. Undocumented contributions can create tax issues if the company later returns the money. The IRS may treat it as a distribution or dividend depending on how the business is structured.


Multiple shareholders are contributing different amounts.

Each shareholder's contribution should be tracked separately and linked to their ownership stake. If contributions are unequal, confirm with your NCO advisor whether this affects the equity structure or creates any obligations under a shareholder agreement.


You want to contribute equipment or other property instead of cash.

Non-cash contributions are recorded at the fair market value of the asset. The asset goes on the Balance Sheet, and equity increases by the same amount. This is a more complex transaction. Your NCO advisor should oversee it.

FAQ

Is a capital contribution taxable to the business?

No. Contributions of capital to a business are not income. They increase equity.


Can I get my contribution back?

If it was recorded as an owner/shareholder loan: yes, the business can repay you when it has the cash. If it was recorded as equity (share capital or owner's capital): not without formal procedures. For corporations, returning equity involves redeeming shares or paying dividends, which have specific tax implications. Your NCO advisor handles this in planning.


Does contributing money to the business affect my personal taxes?

Generally no. Contributing after-tax personal money to your business is not a personal tax event at the time of contribution. When you eventually get money back (as dividends, distributions, or on sale), there may be personal tax implications.


What's the difference between a capital contribution and a loan from the owner?

A contribution is permanent equity. The business doesn't owe it back. A loan is a liability. The business owes you back with or without interest. The tax treatment of repayments differs significantly. When in doubt about which structure to use, ask your NCO advisor before recording.