Announcement

Collapse
No announcement yet.

Help with Partnership

Collapse
X
Collapse
 
  • Page of 1
  • Filter
  • Time
  • Show
Clear All
new posts
Previous template Next
    #1

    Help with Partnership

    I don't prepare many ptnshps. I have one that was brought to me yesterday. I am confused by something in the agreement.

    It states: INITIAL CONTRIBUTIONS. The agreed total value of such property and cash is $10,000 contributed by PTR#1 on the official opening day of Jan 1, 2012. We have agreeed to treat PTR#1's personal equity as a loan for the comapny and pay him back over time with profits. The agreement for all the initial contributions was for PTR#1, PTR#2, and PTR#3 to put in work experience knowledge, educational knowledge, and operation knowledge for 25% each in the company. PTR#4 put in his legal duties and expertise for 25% of the company.

    This is strictly a service business. It does not manufacture anything.

    I guess I'm confused by the contribution being a loan to be paid back. It does not say at what rate or when. Does the PTRNSHP have to pay interest on the contribution? It also doesn't identify what such property is being contributed and how much cash is being contributed.

    Any help would be appreciated.
    Thanks
    You have the right to remain silent. Anything you say will be misquoted, then used against you.
    Tags: None
    #2
    Yes, partners may lend the partnership money. I note that the agreement you quoted did not state any interest to be paid, however.

    So partner #1 will be owed that initial amount, and partnership records as a partner's loan on the books. Then when profit/loss is calculated, that partner's capital account is debited/credited accordingly.
    ChEAr$,
    Harlan Lunsford, EA n LA

    Comment

      #3
      OK Thanks. that makes sense. But, it is written so vaguely. There is no time frame for the repayment, or interest. But, I guess the attorney wanted it in there.
      You have the right to remain silent. Anything you say will be misquoted, then used against you.

      Comment

        #4
        It is very common to see partnership agreements for a new business to NOT state the interest rate or the term of the main partner's loan to the business to get it going. Obviously when you do the accounting the loan adds to his basis.

        Some partnerships will start paying back the loan to the partner as their revenues increase. others will not pay back the loan and it is adjusted in the final return after partnership terminates.
        Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

        Comment

        Previous template Next

        Disclaimer

        Collapse

        This message board allows participants to freely exchange ideas and opinions on areas concerning taxes. The comments posted are the opinions of participants and not that of Tax Materials, Inc. We make no claim as to the accuracy of the information and will not be held liable for any damages caused by using such information. Tax Materials, Inc. reserves the right to delete or modify inappropriate postings.

        Working...
        X