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I just paid out my first distribution from my LLC. I wrote myself a check for $200 (example), using my business account and selected Owner's Equity. When I look at my summary of accounts, I notice that my bank account balance decreased by $200, but now I have a negative Owner's Equity balance (-$200.00). Is this normal?

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It's not abnormal for a company that is as young as yours seems to be. It seems (based on what little I know), that you have debts, or accounts payable that were formerly covered by the $200 cash, but now aren't, because you paid it to yourself. For now, you're "entitled" to pay yourself a draw or a salary. But if you continue to do so without earning money to cover it, your company will fail.

  • I must be booking something wrong because the company has assets (plenty of cash, equipment) and no debt. The company is very young, yes, but it is very profitable. I simply took a small amount of money out of the business as a draw. Is "Owner's Equity" the wrong account maybe? – Brian David Berman Sep 4 '11 at 2:57
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    Actually, I thought of something else: You will have a lot of "retained earnings" if the company is profitable. That's now part of "owner's equity." It could be that the INITIAL equity was zero (or close to). So $200 might "deplete" initial equity. But in fact, it should come out of retained earnings. This should remain positive, therefore so should total owner's equity. – Tom Au Sep 4 '11 at 13:52

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