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1. Initial Investment - The first determining factor is whether the entity is a Corporation (C or S-Corp) or an LLC. 

If a Corporation:

Dr                     Cash

            Cr                     Paid in Capital (based on par value of stock)

            Cr                     Capital Stock

 

Whether you have Paid in Capital or not is determined by your state requirements. Most states allow "No Par" common stock, which eliminates the Paid in Capital entry. There is no tax impact to either choice.

 

If a LLC:

Dr                     Cash

            Cr                     Members Equity

 

2. Loan to Fund Business (if applicable such as an SBA loan)

Dr                Cash

 Cr                Loan - SBA

 

 

3. Purchase of System4 Franchise Right - When either entity purchases the System4 franchise rights the entry would be:

Dr                     Master Franchise Investment (Other Asset)

            Cr                     Cash

            Cr                     Note Payable - System4 

 

 4. Amortization of Investment - The acquisition of the business is classified by the IRS as a section 197 intangible asset and is amortized ratably over a 15-year period. The annual amortization entry would be:

Dr                     Amortization Expense

            Cr                     Master Franchise Investment

 

5. Booking Pre-Opening Expenses – Either process as a vendor payment and code accordingly or if you are reimbursing yourself, then debit the appropriate expense accounts and the credit is to cash with the check made out to you.

Note - All future disbursements for expenses of the business run though the Income Statement unless capitalized and amortized.