LLC equity accounting

[Matt Kowske]

I like this as it is a bit cleaner than my first go at it. I decided to
just use the members existing A/R account instead of creating a new
"UnpaidCommissions". I believe you also meant to say 7,000 instead of
10,000 for the Member A deposit into checking. Thanks for the feedback
it helped clarify the process. Here is the corrected version:

LLC:Equity:Member A -> 10,000 credit
LLC:Assets:Accounts Receivable:Member A -> 3,000 debit
LLC:Assets:Checking -> 7,000 debit

LLC:Equity:Member B -> 10,000 credit
LLC:Assets:Checking -> 10,000 debit

LLC:Assets:Buildings -> 100,000 debit
LLC:Liabilities:Mortgage -> 80,000 credit
LLC:Assets:Checking -> 17,000 credit
LLC:Assets:Accounts Receivable:Member A -> 3,000 credit


On 01/13/2016 09:35 AM, Buddha Buck wrote:
> It could work that way, but it does lead to a period where the equity
> is not 50/50. Since what is happening is that Member A is donating
> equity in the form of the commission discount as well as cash, perhaps
> it could be recorded that way:
>
> LLC:Equity:Member A -> 10,000 credit
> LLC:Assets:UnpaidCommissions -> 3,000 debit
> LLC:Assets:Checking -> 10,000 debit
>
> LLC:Equity:Member B -> 10,000 credit
> LLC:Assets:Checking -> 10,000 debit
>
> LLC:Assets:Buildings -> 100,000 debit
> LLC:Liabilities:Mortgage -> 80,000 credit
> LLC:Assets:Checking -> 17,000 credit
> LLC:Assets:UnpaidCommissions -> 3,000 credit
>
> You could even combine the first two transactions, if they happened
> contemporaneously, to completely eliminate a break from 50/50 split.
> I am uncertain as to the name of the "UnpaidCommissions" account.
> There may be a better name to call it.
>
> On Wed, Jan 13, 2016 at 1:36 AM Matt Kowske <jmk at cmail.nu
> <mailto:jmk at cmail.nu>> wrote:
>
>     I think I may have figured this out right after I sent it, but
>     could use
>     some verification from others.
>
>     The second scenario I was working through would look like this:
>
>     LLC:Equity:Member A -> 7,000 credit
>     LLC:Assets:Checking -> 7,000 debit
>
>
>     LLC:Equity:Member B -> 10,000 credit
>     LLC:Assets:Checking -> 10,000 debit
>
>     Now, Member A does have 3,000 less equity than Member B, upsetting the
>     50/50 split, but can be re-established and accounted for in the
>     final closing transaction:
>
>     LLC:Assets:New Property -> 100,000 debit
>     LLC:Liabilities:Mortgage -> 80,000 credit
>     LLC:Assets:Checking -> 17,000 credit
>     LLC:Equity:Member A -> 3,000 credit
>
>     Balances out... seems right?
>
>
>     On 01/13/2016 12:10 AM, jmk wrote:
>     > This is an accounting question. Here is the scenario: there is a 2
>     > member real estate LLC and each member has 50% equity in the
>     business.
>     > When a property is purchased funds are normally transferred into
>     the LLC
>     > Checking from each member (50% of the closing costs for each), which
>     > increases each members equity by that amount. A check is then
>     written at
>     > closing time from the LLC Checking. E.g.
>     >
>     > Closing costs: 20,000 (each member responsible for 10,000)
>     >
>     > LLC:Equity:Member A -> 10,000 credit
>     > LLC:Assets:Checking -> 10,000 debit
>     >
>     > LLC:Equity:Member B -> 10,000 credit
>     > LLC:Assets:Checking -> 10,000 debit
>     >
>     > LLC:Assets:Checking -> 20,000 credit at time of closing
>     >
>     > This all works wonderful for us as equity is kept at 50% for each
>     > member. Now suppose that member A has gotten their real estate
>     license
>     > and on the next deal is going to waive her 3% commission that
>     the seller
>     > would normally have to pay to the real estate brokerage. Instead
>     this 3%
>     > will be paid by the seller and go towards reducing our down
>     payment in
>     > the HUD statement. Essentially, we get a 3% credit on the buyer (us)
>     > side of the transaction. So now instead of 20,000 for closing
>     costs it
>     > is 17,000 (3% of this 100k purchase is 3,000). I'm having a terrible
>     > time trying to account for this commission and keeping equity 50/50
>     > still. Member B would still need to deposit their 10,000 but
>     Member A is
>     > now only responsible for 7,000, as 3,000 of the 10k is her
>     commission
>     > for the sale, paid indirectly to her by way of a reduced down
>     payment.
>     >
>     > LLC:Equity:Member A -> 10,000 credit
>     > LLC:Assets:Checking -> 7,000 debit
>     > (here I need to account for the 3,000 somewhere -- and is where I'm
>     > getting lost)
>     >
>     > LLC:Equity:Member B -> 10,000 credit
>     > LLC:Assets:Checking -> 10,000 debit
>     >
>     > LLC:Assets:Checking -> 17,000 credit at time of closing
>     >
>     > My question is how I can account for this with double entry
>     bookkeeping.
>     > I must be missing something.
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