LLC equity accounting

[Buddha Buck]

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> 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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