![]() 11/09/2020 at 09:33 • Filed to: None | ![]() | ![]() |
I have a situation where an existing business has been purchased by my new employer. The new owners have a new LLC so we’re starting a new company in QB rather than taking over the old one. The new owners paid for the deposit on the business as well as the first fees for insurance out-of-pocket, as the business loan got delayed and didn’t arrive by the closing date. How is the reimbursement for that handled? Does that fall under equity? I still don’t understand equity fully.
We do have an actual accountant available to us but he’s not re sponded to our emails.
![]() 11/09/2020 at 09:51 |
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If he’s not responding to your emails, is he really available?
![]() 11/09/2020 at 13:48 |
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CPAs, like doctors, lawyers, etc. come in a variety of flavors and specializations . If your current accountant can’t answer this question I would recommend consulting someone who works on these types of transactions.
I am a CPA but am not confident enough to give you a definitive answer as my experience is very far outside this area - there might be requirements on how the original payments they made need to/were treated. It could be seen as equity (i.e. payment they made increased their ownership stake in the new company), or simply as a loan of some sort.
In either case if they are getting reimbursed in short order (i.e. within the same fiscal period) I would expect that to be a wash (i.e. when you reimburse them you reverse out whatever was recorded when they made the payment in the first place). But is that what was agreed to? For example,
I could see a scenario where the capital they provided up front was considered equity, but an agreement was struck that any payment back to them is considered a salary or a bonus or something and they still retain that equity stake, as compensation for coming through with last minute financing
.