Intercompany Bill Payments and Money Transfers

[QuickBooks Man]

I have a situation to where multiple companies have been paying bills and loaning money to other companies with only one constant partner throughout the 12 partnerships. There has never been documentation of an actual loan status, they are trying to close a few of the companies up without resolving the loans, and this involves a total of 4 partners.

A few examples:

Partnership A - Partner 1, 2, 3
Partnership B - Partner 1, 4
Partnership C - Partner 1
LLC - Partner 1
- Partnership A "loans" money to Partnership C
- Partnership B "loans" money to Partnership C
- Partnership C "loans" money to LLC
- LLC "loans" money to Partnership A

Should these "loans" that have been on the books for 3-4 years be reclassified as owners draws and/or investments since not all of the partners always are with the other companies to make it cleaner and it was usually done without the other's knowledge?

[erchess]

My Two Cents

If one partner conveyed partnership money to another business in which he is an owner and some or all of the his partners in the first do not have ownership and this was done without proper documentation and the approval of the other partners then I might tell everyone concerned to get their own lawyers and wash my hands of them. At the very least you would in fact seem to have draws and contributions of capital rather than loans. To have a valid loan you need to have repayments with interest and preferably a written contract.

[taxxcpa]

Loans to affiliates

I would think something like the accounting rules for branch accounting and the rules for consolidated balance sheets and consolidated profit and loss statements would be the proper way to account for these.

If a 60% owned company loans to a 50% affiliated company there are owners in the first company that do not own an interest in the second one and should be repaid. To the extent of the 50% of identical ownership, the amounts could be offset, but the other 10%, if ignored, are being robbed by the other owners.