I have been keeping books in Excel and Quicken but have finally made the leap to QBD and am now going back to the beginning of CY18 to ensure I have the correct data prepared for our accountants - so apologies if this questions seems simple to all.
I operate several single member LLCs where we have invested in a pooled investment vehicle to lend money against commercial real estate. Said more simply - people contribute their money to the LLC [123 LLC], the LLC contributes to a separate entity [123 Associates], the separate entity then provides a loan to a third-party [Jon Doe] who uses the funds to purchase RE (123 Main St). At no point are the investors considered equity partners or owners. This is a loan investment, and therefore I would think all contributions from investors should be recorded as accounts receivable.
So, my two questions:
1) How do I properly set up and record the contribution from the investors for my group [123 LLC]?
2) How do I accurately record the interest income paid out to them on a monthly basis?
The individual LLCs invest in 123LLC, not people. Unless you have recorded loan docs that each LLC is loaning money to 123, then each LLC is invested in 123LLC as equity partners.
If they are loans, then you pay interest as an expense of 123LLC. If they are not loans you pay guaranteed payments that are recorded on K-1 in addition to pass through profit.
If loans they ate set up as sshort or long term liabilities of 123LLC, not as accounts receivable unless tgey promised money but did not yet give you any. Receivables are money earned but not collected, certainly not the case here whether a loan or equity.
1. my take is the individual LLC is equity invested and you record money in as member contribution. But if 123LLC has only one owner then each loan is recorded as such and interest paid.
2. interest is an interest expense of 123LLC, not 123Associates. And in this scenario the individual investors get absolutely no profit share.
123LLC has People providing equity to it, or perhaps Lending (Liability). You need to work with your own CPA; no one on the internet can review your formation documents.
123LLC is an Investor, either equity partner or lender to the 123Associates.
123Associates is making loans and collecting interest income + principal from the end borrower.
So, 123Associates is either paying principal + interest to 123LLC as a lender, or paying Equity draws, as a partner. Then, 123LLC is either getting interest income and principal, or just getting draws against their equity position in this other "asset" they own. And when People take draws from 123LLC, that is Draws from Equity, no matter what is the relationship between 123LLC and 123Associates, so Question #2 is moot.