USA LLC Accounting for New Member

[Dan Davies]

I currently have an LLC with two members each owning 50%. Each member has a capital balance of $50k. If we add a 3rd member and he contributes $100k for a 1/3 interest, do i re-balance the equity accounts to each have $66.6k or do the two original members have $50k and the new member has $100k in his capital account?

 

[Drmdcpa]

It depends on if the current owners are selling a portion of their interest and thus recieving the cash or if the LLC is recieving the cash and selling more of itself. It would also depend on the tax status (ie. partnership, corporation or disregarded entity) as to how the additional capital is booked.

Assuming partnership and the LLC is recieving the cash, no the internal basis capital accounts should not be adjusted. Each capital account should reflect their respective contributions/distributions/income/expenses/losses from the time of the origination of said capital account.