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Equity Accounts

Hey, I am setting up a company's file for an S-Corp. There is one shareholder who contributed money, a truck and some heavy-duty equipment. He needs to recover some of this invested capital though. I just need some help on the accounts. Here is what I've done so far:

1) Contributed Capital (Equity type) - I've posted the money, truck and equipment here. Since he owes a hundred percent of stock, do I still have to assign par value of shares? If so, what's my plan of actions? 2) Additional Paid-In Capital (Equity type) - I didn't put anything here. He didn't really contribute any cash to the business checking account that he doesn't want back. Can I put some equipment that the owner doesn't want to get the money back for? 3) Capital Distributions (Equity type) - can I withdraw money to the extent my total draw doesn't exceed the contributed amount. Wouldn't it be considered tax-free capital recovery? 4) Shareholder's Loan (Current Liability) - I was thinking if I treat any of the contributed money as a loan, wouldn't IRS impute appropriate tax... 5) Fixed Asset (Asset type) - truck and equipment. 6) Officer's Advance (?) - I am hoping to post all the draws that the owner has already made and then adjust them against his payroll checks, either at the ends of this month, or maybe at the end of the year.

I know there are a lot of questions. i would appreciate any contributions. Hopefully, if we start a conversation, the topics will be narrowed down. I just want to set it all up correctly.

Thanks, Dimitry

Reply to
dima.fedorovich
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Read the articles of incorporation.

If amounts were given to a corporation with the intention of the shareholder being repaid then then the amounts should be posted to an officers loan account not equity. Be carefully that repayment does not trigger any recapture Read tax laws related to Sub-S's

Say what?

What does adjust them against payroll checks mean?

Get the advice of an professional accountant.

Reply to
Allan Martin

S Corporations are NOT entities which should be accounted for unless you have a though knowledge of S Corp taxation. Note that I said it's important to know S Corp TAXATION rather than corporate accounting. That's because S Corps exist only as an tax-enhanced version of a corporation, most normal accounting and specifically corporate accounting rules apply, however, there's the extra nuance of S Corp taxation, special rules about accounting for shareholders, lack of ability to do some of the things you mention below that could be far more easily accomplished w/ an LLC. You should see a competent tax professional before going any farther down the S Corp road. They're great entities but have many complexities which it's obvious you don't know how to handle.

Reply to
San Diego CPA

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