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The chart of accounts is customized to each company. It varies little based on the type of entity.
The issue over the equity interest has a lot to do with how the membership interests were sold or exchanged.
Did Owner B sell his interest to Owner C directly, or did Owner B redeem his interest back to Owner A or to the entity?
How about how did Owner D acquire his interest?
How have you allocated the ownership of the company? Is it 50/50 A and D?
When I ask about chart of accounts, I mean do I set up paid in capital or member interests?
There are capital accounts representing the equity of each member
Owner B sold his interest back to the company. The company issued a check to him.
The original basis needs to be tracked for each member
Did B receive a gain, loss, or get exactly his money back?
Only 3 owners. B sold his shares back to the company.
C then bought 50% interest from the company.
Did B get his money back, or have a gain or a loss?
B would have a loss. B beginning of the year basis plus his allocated earnings was more than the $25,000 received.
OK. So you distributed to him his portion of the allocated earnings, plus only a portion of his equity investment, correct.
That left a portion of his equity in the company, which is you. So this was allocated to your share. Now new investor C comes in and his equity account starts at $30K or whatever he invested.
The $25,000 was a legal transaction covering his entire interest in the company.
Yes, C invested $30,000. Member A's capital is $1,000 plus his share of current year earnings.
OK, then C's in for $30K. simple.That's his equity position to start.
Doesn't matter that your s in $1K or $100K.
OK, I am confused about the books being accounted for as an LLC or more like a corporation.
As to what?
I thought that an LLC would distribute earnings based on their invested capital positions, but I guess not, you look to the operating agreement?
If you are keeping your books to "tax", which most companies your size do, then it is treated like S Corp all around.
Unlike a partnership, which IS different, members shares do not need to be the same as their equity investments
1 member buys 99% for $100 and member 2 buys 1% for $50,000. You can do that.
Yo uthen distribute profits per membership share.
OK, so now I have Paid in Capital A - $1,000 and Paid in Capital B - $30,000. Then 2 retained earnings accounts to track their basis.
Ok Thank you.
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