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Level 2

Recording Equity Payments

Hi! My S Corp is contracted with a client who pays invoices with 50% cash and 50% equity in his LLC. I understand how to record the cash payment in Quickbooks Online, but I don't understand how to record the equity payment. For example, let's say the client's company is valued at $1,000,000. If I send the client an invoice for $10,000, then he sends a check for $5,000 and records 0.5% (i.e. $5,000) equity paid to my S Corp, how would I record the equity payment in Quickbooks Online? Thanks!

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Best answer June 30, 2020

Best Answers
Level 2

Recording Equity Payments

After playing around with the interface for a bit, I found that it's possible to create a new "Payment method" and a new "Deposit to" account when recording invoice payments. I'm not sure whether this is the best way to record these payments, but this looks like it should work. One downside is that this records the equity as a dollar amount rather than a percentage of equity and the dollar amount will change over time. It sounds like Quickbooks simply isn't suited for recording equity as a percentage, number of shares of stock, or anything other than a fixed dollar amount. My plan is to treat this entry as the cost basis for that equity and maintain a separate spreadsheet to keep track of my percentage ownership of the client's company. If anyone knows of a better way to do this in Quickbooks, please let me know. Here is what I did:

 

1. Open the invoice (Sales > Invoices > click an invoice in the list).

2. Click "Receive payment".

3. Click the drop-down list under "Payment method" and click "Add new".

4. Type a name for the payment method (e.g. "Company X Equity") and then click "Save".

5. Click the drop-down list under "Deposit to" and click "Add new".

6. For "Account Type" select "Other Current Assets".

7. For "Detail Type" select "Investments - Other".

8. Under "Name" type a name for the account (e.g. "Company X Equity Account").

9. Choose a starting date, enter an opening balance, and then click "Save and Close".

10. Under "Amount received" enter a dollar amount for the value of the equity received.

11. Click "Save and Close" to record the equity payment.

View solution in original post

3 Comments
Level 15

Recording Equity Payments

The first issue is equity, there is no equity in an s-corp, the owners buy shares of company stock.

 

The issue though seems to be the payment. record the equity portion of the total due as an asset, named for his company

Level 2

Recording Equity Payments

Thanks for your reply. Again, this is equity in my client's LLC, not equity in an S Corp. I'm not sure whether "equity" is the correct technical term, but I'd rather not get bogged down in semantics here. Hopefully the example was clear enough to show what is meant by "equity" in this case. 

 

I would like to know how to record the equity as an asset in Quickbooks Online and how to link that to the invoice so that the invoice shows as paid in full. If you or anyone else could please provide instructions on how to do that or a link to any documentation that describes how to do this, it would be greatly appreciated. Thanks!

Level 2

Recording Equity Payments

After playing around with the interface for a bit, I found that it's possible to create a new "Payment method" and a new "Deposit to" account when recording invoice payments. I'm not sure whether this is the best way to record these payments, but this looks like it should work. One downside is that this records the equity as a dollar amount rather than a percentage of equity and the dollar amount will change over time. It sounds like Quickbooks simply isn't suited for recording equity as a percentage, number of shares of stock, or anything other than a fixed dollar amount. My plan is to treat this entry as the cost basis for that equity and maintain a separate spreadsheet to keep track of my percentage ownership of the client's company. If anyone knows of a better way to do this in Quickbooks, please let me know. Here is what I did:

 

1. Open the invoice (Sales > Invoices > click an invoice in the list).

2. Click "Receive payment".

3. Click the drop-down list under "Payment method" and click "Add new".

4. Type a name for the payment method (e.g. "Company X Equity") and then click "Save".

5. Click the drop-down list under "Deposit to" and click "Add new".

6. For "Account Type" select "Other Current Assets".

7. For "Detail Type" select "Investments - Other".

8. Under "Name" type a name for the account (e.g. "Company X Equity Account").

9. Choose a starting date, enter an opening balance, and then click "Save and Close".

10. Under "Amount received" enter a dollar amount for the value of the equity received.

11. Click "Save and Close" to record the equity payment.

View solution in original post

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