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Muhammad Naushad Khan
November 11, 2022
Question

S Corp

  • November 11, 2022
  • 2 replies
  • 24 views

Hi Community!

 

I am looking for guidance regarding S Corp Equity accounts (with two equal  50% 50% shareholders). How are they maintained in general? 

 

One of my Shareholders left the company in March 2022; so he stopped taking the distributions in march; What do you think how should I account for the Equity accounts so that at the year-end contributions for both of them are equal? What's the way out? 

 

Thanks in advance.

 

2 replies

Rustler
Rustler
Level 15
November 12, 2022

You really need to get with a tax accountant

 

but as I understand it, his equity stopped when he left, so the requirement for matching investment stops then too.  After March he should not have an equity account, unless he is just a shareholder and not working in the corp.

 

Again, get with a tax accountant for the best results

Rainflurry
Rainflurry
Level 11
November 12, 2022

@Muhammad Naushad Khan 

 

Agreed with @Rustler .  I will just add that when an S-corp shareholder exits the company, they need to be bought out.  Therefore, it depends on what was negotiated for their shares when they left the corporation.  Once they are no longer a shareholder, you should not make any further distributions to them, it should have been negotiated at the time of their departure. 

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