Hello,
I have a client that owns an LLC(1) with 4 members. LLC(1) owns interest in LLC(2). The members of LLC(1) contributed, for the sake of numbers, $1 million. During the same month they transferred the $1 million to LLC(2) who used the funds to start the project.
I recorded the contributions made by the members to LLC(1) as follows:
Cash 1,000,000
Contributions member 1 250,000
Contributions member 2 250,000
Contributions member 3 250,000
Contributions member 4 250,000
My question is regarding the transfer to LLC(2). Do I record the transfer from LLC(1) to LLC(2) as an accounts receivable on the books of LLC(2)? I kind of threw it to cash for the mean time and my balance sheet looks like this:
Cash 1,000,000
Bank 100
Members Equity 1,000,100
All the assets of the work in progress is recorded under LLC(2). Contributions made by LLC(1) to LLC(2) were recorded as contributions on LLC(2) which increased LLC(2)'s basis.
How is this situation handled?
Additionally, should I keep my eye out for anything that I may need to know regarding the two LLC's?
Thank you!