I have a 2 partner partnership that started 3 years ago. Partner A contributed $10K while Partner B put in sweat equity. The partnership made profits for each of the years. In 2019, Partner B decided to buy out Partner A for $10K with an installment agreement. How do I close them out in QBO? The only asset as at year end 2018 is cash of $55. Please help.
The problem is that when partner B bought out partner A, that closed the business as a partnership, and partner B (the surviving partner) starts a new company as a sole proprietor. That also means a final partnership income tax return, closing the company sales tax registration, etc etc
The purchase agreement would post to the partner A equity drawing account, thus zeroing out the partner A equity and to a partner B liability account. With the partnership closed the liability of the installment loan become a personal liability.
Thanks Rustler! Just a follow up question, so even though the purchase agreement states the buyout to be in installments (that is, payments are to be made for 12 months after the partnership closed), I need to post to Partner A’s drawing account the full amount correct? Dr Partner A drawing (full amount) and Cr Partner B Liability account (full amount).
We’ve continued using the same books for more than 6 months now and Partner B is making the payments using company funds. I have been posting the payments to his drawing account. Dr Draws and Cr Bank. What do I do with the Liability account created as a result of the partnership closure that will still show on the balance sheet? Thanks again!