There are limited facts provided:
- You don't mention whether this is a loan or an actual investment.
- An S corporation cannot be a shareholder in another S corporation unless the ownership is 100% and a QSUB election is made as noted by @Mike9241
- If this is just a loan, then make sure that you have a loan agreement with reasonable interest (minimum would be the IRS AFR for the month the $$ were loaned).
- The loan needs to be carefully monitored in order to not have it look like an investment.
- If the funding is a loan, then:
- Dr. Loan Receivable XYZ S corporation (this is an asset)
- Cr. Cash
- The above is the entry for the loaning S corporation
- Dr. Cash
- Cr. Loan Payable ZYX S corporation
- The later entry is for the startup S corporation
- Don't be penny wise and pound foolish. Meet with a tax professional and provide them with the goal(s), etc.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
