Question Regarding LLC Capital Contributions

[Mike or Penny Novack]

I am trying to use GnuCash to set up the books of an LLC my wife and I 
created as part of our estate planning strategy. This LLC has as assets 
a cabin in the mountains in New Mexico that my wife and I transferred to 
the LLC. The members (owners) of the LLC are myself, my wife and our 
five adult children. ................ I am not an accountant but I 
generally understand accounting principles............

Well yes, but accounting for a corporation? And I really think you need 
(hope you have) an estate planning professional advising.


  Specifically, my question is how are member capital contributions 
accounted for? The LLC has no income per se   
...............................

Stop right here. I suspect that while this is intended as a corporation 
that will (in effect) lose money there may in fact be income items, 
perhaps small, but to be accounted for. If the corporation has a bank 
account, and presumably it will have one, how about interest on the 
money held to pay expenses as they occur. And perhaps a larger amount 
from the original capital contributions held in higher paying 
instruments until needed.


  and operating expenses, improvements, etc are paid for by capital 
contributions from the members. For example the cabin ownership, itself, 
was transferred from my wife and me to the LLC. Member equity in the LLC 
is based on capital contributions but I am unclear on how to record the 
contributions in the LLC books.

Which is why I said you need to look up "accounting for a corporation", 
in this case presumably a "no stock" corporation.

Contributions would be debits to cash and credits to the contributor's 
account (under equity). I would probably do income and expenses 
normally, then (manually) close to a (temporary) account under equity 
the nets, and then close that to the member's equity shares according to 
your bylaws (how losses and gains to be shared).

If the cabin is used by any of the family they should pay rent to the 
corporation (see, an income item). But your advisor should be able to 
explain. I am NOT qualified to advise you.

Michael D Novack

PS: And not just any professional doing the advising advising. I am 
aware of "advisors" who promise clients all sorts of methods of avoiding 
taxes. But what you need to care about is has the tax courts HAVE been 
ruling on this type of thing, not somebody telling you how they SHOULD 
rule on it.

-- 
There is no possibility of social justice on a dead planet except the equality of the grave.