Discussion:LLC electing S-corp Balance Sheet / Quickbooks

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Discussion Forum Index --> Accounting Questions --> LLC electing S-corp Balance Sheet / Quickbooks


Dcassady (talk|edits) said:

11 May 2013
I am not sure how to convert equity accounts in Quickbooks on this issue. Have an LLC previously taxed as a partnership now elected S-corp status beginning the 1st of this year. They are retaining their LLC legal classification, so there does not need to be "capital stock".

Here are the accounts/balances as of the END of 2012:

Assets:

 22,302 - Checking


  1,174 - Other Assets (Investment Fund)

23,476 TOTAL ASSETS

Liabilities:

   1,140 - Note Payable 1

206,267 - Note Payable 2

207,407 TOTAL LIABILITIES

Equity (Here is where I get really lost....)

(514,110) - Draws - Partner 1 (This is since inception of business)

(514,110) - Draws - Partner 2 (Again, since inception)

         100 - Equity - Partner 1 - (Put in savings account - No idea why - still there)


 345,881 - Retained Earnings


498, 308 - Net Income

(183,931) - TOTAL EQUITY

 23,476 - TOTAL LIAB/EQUITY

Yes, this is correct. There is negative equity. The partners have pretty much withdrawn all profits since inception. I am not completely sure how to convert the equity accounts in Quickbooks. If anyone could help me with this, I would be so grateful. I am sure that I learned this in accounting school but that was about 30 years ago, and then it certainly wouldn't have covered doing it in Quickbooks. I have never encountered a conversion like this before!! I have my thoughts on what I SHOULD do, but I sure would like to hear from someone else.

On TOP of this, Partner 1 has somehow gained majority control. (This just happened last week - same week S-corp status was approved). Partner 1 has gotten Partner 2 to agree to a 60/40 split. I should get a copy of papers from attorney when they are done....not even sure what they did there...hoping it is clearer to me when I see papers. Pretty sure Partner 1 wants to move LLC to his home state and squeeze Partner 2 out.

But, I will settle for figuring out this issue first.

Thanks in advance!!

Ckenefick (talk|edits) said:

11 May 2013
Yes, this is correct. There is negative equity. The partners have pretty much withdrawn all profits since inception.

Not "pretty much"...they have...and then some.

Might want to check out Section 357(c) to meet the disaster that awaits this situation.

TERRYT (talk|edits) said:

11 May 2013
Who ever recommended the S election is going to get sueddddddddd.

Dcassady (talk|edits) said:

11 May 2013
Yes, I am aware of Sec. 357(c), however, somewhere I thought I read about an exclusion that might apply to this case..I will have to research to see where I ever got that idea. Partner 1, who lives in another state, and has been upset about the LLC having to pay IL a non-resident tax on his share since day ONE, consulted with a CPA in his home state. S-corp was the suggestion, however, they are maintaining the IL LLC legal status. What a mess.

Dcassady (talk|edits) said:

11 May 2013
Correction on the above statement...they have elected S-corp TAX STATUS by filing Form 2553. They did not legally change the formation of the business. Not sure if I was clear on that. Does that help?

Trillium (talk|edits) said:

14 May 2013
For those who find this discussion in a search on this topic, later, you might be interested in additional responses to this OP's question over on the Lacerte community board.

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