Sloshing of monies by one client between companies

@Susan607  Let's start with addressing the management elephant in the room.

An LLC is a Limited Liability Company. In short, if someone has a legal grievance with the LLC, they can only go after what the LLC owns, not what the members of the LLC own.

Hence, Limited Liability.

The client needs to understand that this Limited Liability is not unconditional. If they keep treating the LLCs as their personal piggy bank, the Limited Liability is as useful as a soggy piece of tissue paper. There has to be a clear and distinct separation of the LLC's assets and the client's assets.

Tell the client that.

Now, to the actual accounting questions, I'll answer in broad strokes since your cat, er, client seems to be very rambunctious.

While the exact terms used vary based on the company type and structure involved, there are some general rules you can follow when the client starts getting loose with their business practices.

First, if the owner takes money out of the business without any intention of paying it back, it is a draw against Equity. This case is most easily applied to the owner buying personal items using the company bank account, or the owner charging personal items to the company credit card.

Likewise, if the owner puts business expenses on their personal credit card, it is functionally no different than a owner contribution to equity, just with fewer steps. There is no real difference between an owner taking on personal liability for a company (using their personal credit card to buy things for the company) and the owner putting their own money into the business bank account. Same deal for buying things for the company out of their personal bank account.

Second, if the owner takes money out of the business with the intention of paying it back, it is a Current Asset to the company, perhaps called 'Loan to Owner'.

Likewise, if the owner puts money into the business with the intention of taking it back, it is a Liability to the company, perhaps called 'Loan from Owner'.

These two concepts can be applied, individually and together, to answer most any shenanigans a client may get up to between their various businesses.

For instance, if Company B pays for something for Company A with no intention of being paid back, Company A would recognize it as a Equity Contribution set against an appropriate expense or asset account. Company B would recognize it as an Equity Distribution set against the relevant bank account, credit card, or even petty cash.

That is, it would be no different than the owner taking money out of B (Distribution) and putting it into A (Contribution).

In QB, this could be recognized most easily in a Check. For Company A, you would have a line recognizing the expense or asset with the relevant positive amount and a line recognizing the contribution with an opposing negative amount. This enters both the expense/asset and contribution amounts while having no impact on the checking account listed on the Check, while also making it easier for QB to pull the data to a report than using a GJE would.

All that being said, you should knuckle down on getting your client to knock that garbage off. Trust me when I say they will only get worse; I have a client of my own who loves shuffling money between nine different companies and around 20 bank accounts, and it is rather a nightmare to keep track of.

Also, you should not be including his personal checking account in any business books. It makes a mire of things, and you could do just as well using an Equity Contribution account.