My spouse and I are working on buying out the owner of the S-Corp we work for. I handle the bookkeeping, scheduling, marketing, office stuff, etc. I have a BBA and minor in Accounting but I'm stumped on how to proceed here.
As of January 1 this year we purchased 200 of 1000 shares of the company. But we have not sorted out the equity accounts.
He formed this S-corp in 2015 by splitting up another company he owned into two companies. When I came on at the end of 2017 the equity section on the balance sheet had only the following accounts:
They had never set up any sort of stock accounts and I'm not sure how to fix this retroactively. What can I do now to make sure we all have our respective basis recorded properly?
I added separate contribution and distribution accounts for each of us this year but we still don't have stock reflected anywhere.
You will need to customize your chart of accounts list (Equity accounts) and then re-create what "actually" happened in the books in terms of Equity contributions. This can be done in a number of ways. Private message me if you need more specific advice and help.
Thanks for your message! I spoke with the owner's CPA over the weekend and he told me I just needed to add the stock accounts in at $0 par value which seems iffy to me. I've concluded that I need to find my own CPA to come in here and look at it.
How would you go about recreating the equity contributions? As far as I can tell he hasn't had to put anything in, so to speak, since he split the companies in 2015. They called everything he ever took out (other than salary) "owner draws" and left a decent bit in retained earnings.