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Equity Accounts and Balance Sheet

I own a small business with my business partner. Our business is set up as a Partnership LLC. And I want to contribute funds to our business. And i understand that  the contribution would be reflected in my equity account. However, for whatever reason, am i able to withdrawal that equity contribution out of the business down the road? And how should that look on our balance sheet?

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Re: Equity Accounts and Balance Sheet


@lynnLorretta wrote:

I own a small business with my business partner. Our business is set up as a Partnership LLC. And I want to contribute funds to our business. And i understand that  the contribution would be reflected in my equity account. However, for whatever reason, am i able to withdrawal that equity contribution out of the business down the road? And how should that look on our balance sheet?


As a partnership, organized as LLC or not, any and all money you and/or your partner add or remove from the business is equity movement. In an LLC you are members, a non-organized partnership just has partners (a partnership agreement is still a must)

 

You each should have a full set of 4 equity accounts. 3 that you post to and one parent account that sums the others but is never posted to. (you can survive with just the 3 each)

 

Member 1 Overall Equity

  • Member 1 Equity
  • Member 1 Contributions
  • Member 1 Withdrawals

in the example money you put in is contribution, money you get out is withdrawal. Once a year on Jan 1 you post an entry that moves whatever balance is in contribution and draw into regular equity (which is also where profit/loss is distributed, matching the K1 from the 1065)

 

Only if required by the partnership agreement (or in case of Subchapter S corporations) is there any particular requirement that a contributing member get their excess equity contribution returned to them.  Usually per the agreements any imbalance has no effect on P/L allocation. So your extra money added in just sits there until such a time as partnership is dissolved or you pull out enough to repay yourself.

 

Additionally , if specifically allowed by partnership agreement, one member can receive interest income on a sizable contribution or receive guaranteed payments for work performed (not slary, not wages, shows up on K-1)

https://www.thebalancesmb.com/what-are-llc-guaranteed-payments-4163089