Initial Investment Entry

camispear · ‎July 17, 2022

Hello,

My husband and I are becoming 50% owners of my a business my parents originally purchased one year ago. They put $36,000 into an operating account to get things going, so we were going to put in $18000 as our "buy in", and they are going to withdraw $18,000, so that it shows each couple put in an initial investment for operating expenses as $18000. For our $18000, we "sold" our car to the business for $10K, and then are reducing our salary this month by $8000 for the rest. Any help on how to do entries to show these transactions? Thank you in advance!

Rustler · ‎July 18, 2022

The business is a partnership and should be registered as such with the IRS (getting its own TIN), and the state for sales tax.

Create the owner equity accounts for the new partners

deposit the 18K in the bank and use owner equity as the source account for the deposit

enter a payment to the original owners for 18K and use owner equity drawing as the expense (reason) for the payment

there is no salary in a partnership, each owner/partner takes equity draws as needed

camispear · ‎July 18, 2022

Thank you! The company is registered as an LLC but with an S Corp tax status. Does that change anything?

Rustler · ‎July 19, 2022

LLC is not a business type, it is just a legal protection.

Yes s-corp make a big difference. There are no draws from an s-corp and all working shareholders must be on payroll. Get with a tax accountant and be sure to get this correct from the get go

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Initial Investment Entry