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April 18, 2022
Question

How do I account for personal funds being used to seed a new company

  • April 18, 2022
  • 1 reply
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Just started a new business and am using personal funds to seed it. QB keeps counting it as sales, when it is seed money from our personal account.

1 reply

April 18, 2022

Process is pretty simple, but you may need to create a couple of Accounts first.

 

First go to your Chart of Accounts and confirm there is an Owner Equity Acct.  If not create one (type is Equity).

 

If it does exist (or you created it) I'd then suggest creating two Sub Accts, they're not mandatory, but just makes thing cleaner.  So while you're in the Chart of Accounts, create a New Account called Owner Contribution.  Again it is an Equity Acct, but this time also select Sub Account and select the Owner Equity Acct.  When that has been saved, create another Sub Account and call it Owner Draw.

 

Owner Equity (Parent Acct)

 - Owner Contribution (Sub Acct)

 - Owner Draw (Sub Acct)

 

To put the money into the new business, deposit the check into your new Business Checking Account (do not use your personal accounts for the business).  The Account you are going to associate this Deposit to will be the Owner Contribution Acct.  Which now shows the Equity you put into the business.  (Is should look like Owner Equity:Owner Contribution in the Checking Register)

 

Before you take money out of the company, have a discussion with your Accountant.  You'll want to determine if you just take money straight out of the company (e.g. write yourself a check associated with the Owner Draw Acct.) or maybe you're going to take a Salary, which would then come out of a Payroll Acct.