New accounting rules could impact how business owners share losses
Limited liability companies and partnerships have different balance sheet structures compared to corporations, with a focus on individual capital accounts for each owner. While LLC law does not mandate capital accounts, federal tax rules for partnerships and multi-member LLCs closely scrutinize them for tax benefit allocations. Understanding capital accounts is crucial for accounting practices, state default rules, and tax compliance. Analyzing capital accounts helps clarify how owners agree to share losses economically.