I have a question concerning the capital account setup and funds contributed to the partnership company and would like to know if I am doing it right.
So the company started in March, and the starting balance was USD100,000. Partner A holds 51% of the share, and Partner B holds 49% of the share. Since Partner B had no funds, he took the loan from Partner A so Partner A’s starting balance is 51,000, and Partner B’s is 49,000 (the loan from Partner A).
How should I reflect this on the manager’s account?
Should I simply set in the capital account as 51,000 paid in advance by Partner A and 49,000 by Partner B, or should I set the starting balance of Partner A by 100,000, and somehow set intercompany loans between two partners?
This is not a question appropriate for this forum, because the loan between partners is not a transaction of the business. This is a matter on which you should consult an accountant.
I’m not an accountant but I think keep this loan as not a business transaction. Therefore funds contributed from partners will be equal to 51k & 49k respectively. So partner B can pay off the loan either from his/her salary or drawings.
You can make a separate contract for this loan that has nothing to do with this particular business.
As already alerted to by the earlier respondents but for all clarity.
The loan from Partner A to Partner B of 49,000 can not be part of the business transactions. It is an interpersonal arrangement that should be recorded separate from the business through whatever loan agreement between two individuals (consult a lawyer!).
Subsequently Partner A deposits 51,000 and Partner B 49,000 from their own bank accounts into the business bank account and is recorded as “Funds contributed” under each Capital account explaining the share value.