Stocks and cash contribution to LLC taxed as partnership

[amyonghwee]

I have setup a LLC taxed as partnership around 1.5 years ago. For last year 2023 tax returns, I did not file balance sheet since  income is less than $250,000 and total assets less than $1,000,000 
I just transferred some stock- shares and cash into brokerage account under this LLC.
How should this contribution be handled and reported for tax return 2024 ???

[tagteam]

I'll page @Rick19744, but this is a contribution to capital.

Other than the capital accounts being adjusted, the balance sheet does also with debits to cash and other investments and then a corresponding credit to partner's capital accounts.

[Rick19744]

While the facts are limited:

• The facts are not clear.  Clarify "I transferred some stock - shares and cash into a brokerage account"
  • How did the LLC obtain said "stock - shares"?
  • I don't want to be responding until the facts are a little more clear
• So if you can expand on your facts, that would be great.
• Additionally, if you contributed items to the LLC, was this in relation to your initial funding of the LLC?
• Regardless of what the IRS requirements are for providing the balance sheet information on a tax return, a business should generally maintain a balance sheet.  This provides important financial information, especially in a multi-member LLC environment.

[amyonghwee]

• Clarify "I transferred some stock - shares and cash into a brokerage account"
  • I transferred stocks and cash from my trust brokerage account into my LLC brokerage account
• Additionally, if you contributed items to the LLC, was this in relation to your initial funding of the LLC?
  • LLC was formed in May 2023 and initial funding was made at that time. These transfer of stocks and cash from my trust brokerage account happens only last week, 1st week of Oct 2024
• Regardless of what the IRS requirements are for providing the balance sheet information on a tax return, a business should generally maintain a balance sheet.  This provides important financial information, especially in a multi-member LLC environment.
  • Yes I fully agree.
  • This LLC partnership only has 2 members [1] Myself [2] SMLLC taxed as C-corp (I am the owner). 

[Rick19744 · Accepted solution]

Follow-up comments:

• I'm not sure what your goal is with the structure and I would recommend you consult with a tax professional.  I have some concerns with the business purpose of the entity and potential shifting of tax implications.  If challenged, the IRS may collapse this due to "substance over form".  I'm not going into detail, as this is not a discussion for a forum such as this.
• There are numerous issues when contributing assets where the FMV does not equal the cost basis; which is most likely the case based on the limited facts.  As a result, you should get some tax advice on how to handle the stocks that you owned personally, then contributed those to the LLC.  There are special rules that will follow those specific stocks.
• On the initial transfer, you would DR. Cash DR. Stocks (investment) and CR Partner Capital as noted by @tagteam 
• That's all you need to do, since the investment is now on the books of the LLC; doesn't matter that they are held at the brokerage.  They will always be reflected as an investment account.