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J
JP151
August 17, 2023
Question

Transfer of ownership in an S-corp

  • August 17, 2023
  • 1 reply
  • 0 views

S-corporation has 2 owners. 50% owners each.  One owner bought out the other owner as of 1/30/23.  How can I record that transaction in QB?  The payment was 1/2 of the company's worth.

1 reply

Rustler
Rustler
August 21, 2023

Owner A buys out owner B

Journal entries
debit owner B capital account and credit owner A capital account for the balance in B
debit owner B additional paid in capital and credit owner A additional paid in capital for the balance in B

 

Owner A pays owner B from his personal funds

J
JP151Author
August 21, 2023

Owner B made a company check to himself for 1/2 the company's worth.  

 

How is that treated?

Rainflurry
Rainflurry
August 22, 2023

@JP151 

 

Capital accounts are for sole proprietorships, not S-corps.  If Owner B wrote a check to himself from the company, then the company bought him out, not Owner A.  The check written from the company to Owner B should be assigned to an equity account called Treasury Stock (this is a contra-equity account so it will have a negative balance).  However, you need to make sure that your state allows an S-corp to hold treasury stock - not all do.  IMO, you should contact the company's CPA on this.      

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