YE Closing Entries to Distribute Net Income to LLC Partners

boolabonga · ‎February 11, 2022

I'm Using Quickbooks Desktop Premier Edition 2021 and am trying to close the books for 2021 for our LLC which has 3 partners. I have a 3 account structure setup for each partner (Draw, Contributions and Equity) which sums to parent Capital account for each partner. I recorded a journal entry on Jan 1, 2022 to debit contributions and credit equity for each partner. Then I wanted to record a journal entry, again on Jan 1, 2022, to distribute 2021 net income to each partner's equity account by debiting retained earnings and crediting partner equity for each partner's share. However, Quickbooks is giving me the following warning message:

"You are about to post to the Retained Earnings account, "Retained Earnings". Quickbooks uses this account to track profits from earlier periods that have not yet been distributed. This is an automatically generated account and in most cases you should post to another equity account".

Question: Is there some other approach I should take in QB to distribute the Net Income to partner equity accounts, or do I just ignore the error message.

Thanks for any advice!

Rustler · ‎February 12, 2022

Ignore the message in this case, you are doing it correct

boolabonga · ‎February 12, 2022

Thanks for your reply Rustler!

Rainflurry · ‎February 12, 2022

@boolabonga

Just an FYI - the IRS requires net income of an LLC taxed as a partnership to be distributed at year-end. So, it should be distributed on 12-31-21 instead of 1-1-22.

partner2021 · ‎May 09, 2022

Hello there.

I am struggling in creating my Equities account for each partners.

I have:

31000 - Partners Investments

31001 - Partner 1

31002 - Partner 2

32000 - Partners Draw

32001 - Partner 1

32002 - Partner 2

What I am missing?

Thanks

ZackE · ‎May 09, 2022

Thanks for joining this thread, partner2021.

You can add new accounts from your chart of accounts screen.

Here's how:

In the top menu bar, go to Lists, then Chart of Accounts.
Use your Account ▼ drop-down list and choose New.
Pick an account type.
Hit Continue.
Enter all necessary details for the account.
Select Save & Close.

In regard to identifying which accounts you may be missing, I'd recommend working with an accounting professional. If you're in need of one, there's an awesome tool on our website called Find a ProAdvisor. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.

Here's how it works:

Go to our Find a ProAdvisor page.
Use the City or ZIP search field to specify a location.
Select Find a ProAdvisor.
Browse through your results and find one that works best for the business. You can click on each ProAdvisor's profile to learn more information about them.

Once you've found an accountant, they can be contacted through their Send a message form:

Use the available text box to introduce yourself. Be sure to include details about which services you're looking for.
Enter your appropriate info in the Your name, Your email, and Your phone number (optional) fields.
Hit Send message.

I've also included a detailed resource about working with the chart of accounts screen which may come in handy moving forward: Learn about the chart of accounts

Please don't hesitate to send a reply if there's any additional questions. Have a great day!

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YE Closing Entries to Distribute Net Income to LLC Partners