cancel
Showing results for 
Search instead for 
Did you mean: 
cdhodgdon
Level 3

Business Setup Cost and Such

I have formed an LLC (I know that the IRS does not see that as the business) which is going to be taxed as a Partnership.  Currently the Partnership is just me and my wife, though we are in a Community Property state and such, this coming year we will be adding our 4 adult children on as owners, so this is setup as a multi-member LLC.

 

My wife and I used funds we had to start the business, this would be $1800 that was used to start it up.  So I assume that I need to create an Equity Account for both myself and my wife and then equity account later in the future when we onboard the kids.  

 

When I setup the Quickbooks, I used the default service chart of account (if I remember right) as our business will only be providing a service. Currently in the Quickbooks file, I have the following, but I think I need to adjust them

 

My Name - Equity Account

Wife's Name - Equity Account

 

30000 - Opening Balance Equity

30300 - Member 1 Draws

30400 - Member 1 Equity

30500 - Member 2 Draws

30600 - Member 2 Equity

32000 - Retained Earnings

 

I also need to record the start-up that we used those funds to pay, LLC formation in Texas, required licensing fees to the State of Texas and insurance.  The business will not start operation until after Jan 1, 2019, as we are waiting on the license to be issued by the State of Texas which will be after the first of the year, so for our 2018 tax's the only things that will be reported are startup expenses, totaling just under the $1800 we put in.  A few of these items that we had to do for start-up will also be required on a yearly basis going forward, such as the state license and insurance.

 

Trying to get things set right, so that they can easily import into TurboTax Business for generation of the partnership return and forms. 

 

Solved
Best answer January 01, 2019

Best Answers
Rustler
Level 15

Business Setup Cost and Such

@cdhodgdon

 

You want the chart of accounts to show the total amount spent, but  you also might want to see the sub areas you spent money on, as an example
utility expense - you can pay all utilities (water, gas, elect, internet, etc) and book all payments to the that one account.  But that also means you can not see when one of them takes a drastic jump, like a water leak would cause.

In QB a parent account is a summing account by default (and if there are sub accounts you do not post to the parent account), so it shows the total of all sub accounts.  So for utility expense, it might look like
Utility expense
>>elect
>>gas
>>internet
>>water

that allows you to look at individual expenses, or the sum total at one glance

As I said earlier, IMO that same concept needs to be used with equity

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

Yes the list of equity accounts you show will work, but come the new year you usually clear each partners equity drawing and investment accounts to equity as well as retained earnings.  Keeping them together as I show make it a lot easier to find, and the parent / sub account structure makes reading the balance sheet easier too.

but it is up to you

I got your email, thanks for the heads up.

I'm in Kerrville, where you at?

View solution in original post

14 Comments
Rustler
Level 15

Business Setup Cost and Such

For a company taxed as a sole proprietor (schedule C) or partnership (form 1065), I recommend you have the following for owner/partner equity accounts (one set for each partner if a partnership)
[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

 

create your business bank accounts and a cash type bank account in the chart of accounts

for your money you started the business with, make a deposit in the cash bank account and use the partner equity investment account as the source account for the deposit
then use write check on the cash account, do not print this is just a data entry form, and list the expenses and amounts, when you are done the cash bank account balance should be zero.
do the same thing for the other partner

 

Ignore transferring to turbo tax, it does not work well at all.  Intuit turbo tax is a year round effort by tax accountants to stay on top of regulation and form changes - NOT so for QB the tax line assignments for accounts has not changed since 2006.

 

I suggest you structure the chart of account according to the form 1065 you will file for the business, use sub accounts to track detail if needed.  Then assuming the _P&L is right, you can just type in the numbers in turbo tax, switch to forms I find that lot easier than their interview process

cdhodgdon
Level 3

Business Setup Cost and Such

 

@Rustler

 

Should I put myself and my wife's name in as Vendors so that it can go into the Received From or how should I put our names somewhere else.  At this time we don't have any employees and by the end of 2019 we will be adding our four adult children on as owners (so will have to create equity accounts for them at that time).  So I know we don't list under Employees our names, but where should they be put.  

I have a couple other things with this, that I will post later, just trying to take it one step at a time.  Thank in advance.

 

Rustler
Level 15

Business Setup Cost and Such

no, the owner/partner is no a vendor

vendors are who you buy from

cdhodgdon
Level 3

Business Setup Cost and Such

@Rustler 

 

That is what I thought as well, but I had found another post (not here on the QB site) that talked about setting up the members/partnership of the partnership as vendors.  I thought that was kind of odd.

 

So would it be better to list them under Other Names or something, so that when I do something, like the deposit into the cash account, it shows who it was received from.  Please see attached image.

Rustler
Level 15

Business Setup Cost and Such

no do not use that blcok

the account listed as the source shows who an equity investment is from

 

in desktop set up the name as Other Name, that helps if you print checks

cdhodgdon
Level 3

Business Setup Cost and Such

@Rustler

 

Thank you for that.   I just wasn't sure if I need to make sure our names where in those slots or not.

 

I adjusted the equity and draw account to the following:

 

30000 - Opening Balance Equity

30300 - Husband Draw

30400 - Huaband Equity

30500 - Wife Draw

30600 - Wife Equity

 

Does is correct?  Then when the kids get added, we just continue the numbers and add each with their names and Equity/Draw per kid.

 

Now you might not be able to answer this one.  We setup the business, got our insurance, got our sales tax numbers, EIN and such now in 2018.  We are open for business per-say, but can not take on any clients until after Jan 1, 2019, as the service we are providing is a regulated service in the State of Texas and we are waiting on our license to show that we can provide that regulated service.  Do I have to wait until next tax year (2019 taxes) before I can claim those items as part of our organizational or startup cost, or can they be claimed in this year?  If you can't answer this one, that is fine.  I have it also at the TurboTax website and gotten several various answers.

 

@Rustler, by the way, I sent you an email, yesterday I think about your items on your website and that the pricing of at least one of them does not match what is said on the site and what is actually charged.

Rustler
Level 15

Business Setup Cost and Such

@cdhodgdon

 

You want the chart of accounts to show the total amount spent, but  you also might want to see the sub areas you spent money on, as an example
utility expense - you can pay all utilities (water, gas, elect, internet, etc) and book all payments to the that one account.  But that also means you can not see when one of them takes a drastic jump, like a water leak would cause.

In QB a parent account is a summing account by default (and if there are sub accounts you do not post to the parent account), so it shows the total of all sub accounts.  So for utility expense, it might look like
Utility expense
>>elect
>>gas
>>internet
>>water

that allows you to look at individual expenses, or the sum total at one glance

As I said earlier, IMO that same concept needs to be used with equity

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

Yes the list of equity accounts you show will work, but come the new year you usually clear each partners equity drawing and investment accounts to equity as well as retained earnings.  Keeping them together as I show make it a lot easier to find, and the parent / sub account structure makes reading the balance sheet easier too.

but it is up to you

I got your email, thanks for the heads up.

I'm in Kerrville, where you at?

View solution in original post

cdhodgdon
Level 3

Business Setup Cost and Such

@Rustler

 

Not sure what happened I made a reply last night, but it does not see to have posted, LOL.  

 

We are located in Kaufman, which is about 35 miles east of Dallas to answer that question.

 

I think I have an idea on what you are saying so will list it here and see if I am correct:

 

I believe from what you have said, I should set up the following (or have setup):

 

Opening Balance Equity Account

 

Owner 1 Name Equity Account

>>Equity

>>>>Equity Draw

>>>>Equity Investment

 

Owner 2 Name Equity Account

>>Equity

>>>>Equity Draw

>>>>Equity Investment

 

or should it be

 

Owner 1 Name Equity

>>>>Equity Draw

>>>>Equity Investment

 

If I was number the accounts (will use simple numbers here), should it look like this

 

100 Chris Equity

>>101 Equity

>>>102 Equity Draw

>>>103 Equity Investment

 

104 Onwer 2 Equity

>>105 Equity

>>>106 Equity Draw

>>>107 Equity Investment

 

Thanks in advance.

 

Rustler
Level 15

Business Setup Cost and Such

that works

cdhodgdon
Level 3

Business Setup Cost and Such

@Rustler

 

Ok which one works and then I'll stop bugging you for now,

 

Thanks

Rustler
Level 15

Business Setup Cost and Such

I prefer the last example you posted, but both will work

qbteachmt
Level 15

Business Setup Cost and Such

I prefer this example:

Owner 1 Name Equity

>>>>Equity Draw

>>>>Equity Investment

 

You don't need Three Levels.

 

And your Numbering is not correct. Don't bother, unless it matters. If it matters, then use Standardized numbering.

 

Equity is 3XXX.

 

QuickBooks assigns numbers to each existing account, based on a standard system of numbering as follows:

1000s: Numbers in the 1000s are assets

2000s: Liabilities

3000s: Equity

4000s: Income

5000s: Cost of Sales

6000s, 7000s: Other operating expenses

8000s: Other income

9000s: Other expenses

 

Assigning Account Numbers Yourself

It's harder, but perhaps ultimately more useful to your business, to choose your own numbering/lettering system for account numbers rather than letting QuickBooks choose account numbers for you. Whether you select all your own account numbers or let QuickBooks number the accounts, you need to open the Preferences window and turn on account numbering. In addition to numbering all your existing accounts automatically, QuickBooks places a new field in your New Account window: the Account Number field. Use the following steps to number your accounts:

  1. For all new accounts, refer to your spreadsheet or paper list of account numbers, and enter your own account number in the Number field when setting up the account.
  2. For existing accounts, go to the Edit Account window and change the assigned account number to the one that you prefer.

When choosing account numbers, keep in mind that any financial statements or reports that you want organized by account name are now going to be organized by account number. This is because QuickBooks makes your account number part of the account name (almost like the first word in the name). If you want to have your accounts appear alphabetically on your financial statements, assign account numbers to the accounts in alphabetical order.

cdhodgdon
Level 3

Business Setup Cost and Such

@qbteachmt

 

Oh I know that numbering that I included was not right, was just using it as an example for the post.  The number in my actual file matches normal practice, but thanks for mentioning it in case someone else reads this for ideas.

DRHandyman360
Level 1

Business Setup Cost and Such

Now will this work with say a company that has been up and running for 6 months and is about to close out the books for the fiscal year. When my QB was setup no thought was given to startup or organizational costs. I would like to take them as a deduction this year but don't know how to expense them with out throwing all my numbers off. Is it even possible to achieve this so far from setup? Any help would be great! 

Sign in for the best experience
Ask questions, get answers, and join our large community of QuickBooks users.
Sign In / Sign Up

Need to get in touch?

Contact us