I purchased a milling machine a year before I officially started my business. I’ve given the machine to the business as a property contribution and want my capital account (multi-member LLC) to accurately reflect that contribution.
What’s the best way to document that property contribution in Manager? I thought about adding a cash receipt to the cash on hand and attributing it to the capital account, then using that to “pay” for the asset, but I’m not sure if that’s the right way to go about it.
The best and easiest way to do this is to use the Journal Entries tab.
Record the contribution of the milling machine as a debit to the LLC’s fixed assets, and a credit to your Capital Account. You can use the “Narration” field in the Journal Entry to note it was contributed when forming the business.
This would not be proper for an LLC, or a newly formed business. Just because the business did not pay out cash for the asset does not mean they have an asset without value, nor that the contributor has nothing invested in the business.
The asset should be recognized at its fair value to the business when the business receives it and the contributing member receives the same as a capital contribution.