How to Add Capital Contributions to an LLC
Setting up the necessary accounts is the first step to adding capital contributions to the accounting records of an LLC. An LLC is essentially a partnership with the structure of a corporation, and the bookkeeping is similar to that of a corporation. An LLC offers its partners, who are referred to as "members," some tax benefits. The number of partners can be unlimited, or the entity can be a single member LLC, but it must have at least one manager member. Partners can also be made up of corporations and other entities. Individual states enforce their own laws regarding LLCs.
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Instructions
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Organize a meeting of members to determine the amount of capital each member will contribute. Have someone take minutes of the meeting and record everything that is said, including the amount of capital each member will contribute. The meeting can be held in person, by teleconference or online. The important thing is to record what is said and distribute this to all the members. If you have a single member LLC you obviously do not have to do this.
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Set up your bookkeeping records in the same way that you would set up a corporation and add an account for each member in the capital or equity section of your chart of accounts (example: 3001-John Smith, 3002-Anne Jones, 3003-Richard Green). Contributions can be in the form of cash or goods, such as computers or office furniture, and members must agree on a value for noncash contributions before they are accepted.
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Credit and debit the appropriate accounts. For example, credit the capital account 3001-John Smith $1,000 and debit the cash account 1001-bank $1,000. Credit the capital account 3002-Anne Jones $1,000 and debit the fixed asset account 2004-computers $1,000. Credit the capital account 3003-Richard Green $1,000 and debit the cash account 1001-bank $500 and debit the fixed asset account 2008-furniture $500.
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The company now owns the capital contributions and the members each have $1,000 equity in the business.
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References
- Photo Credit business colleagues preparing for business meeting image by Vladimir Melnik from Fotolia.com
