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Posted by San Diego CPA on May 20, 2007, 2:30 pm
Please log in for more thread options 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.
>
>> 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?
>
> Read the articles of incorporation.
>
>
>> 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?
>
> 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
>
>> 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...
>
> Say what?
>
>
>> 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.
>
> What does adjust them against payroll checks mean?
>
>
>>
>> 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.
>
> Get the advice of an professional accountant.
>
>
>>
>> Thanks,
>> Dimitry
>>
>
>
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