membership interest sale
Greetings to you and wish you well
May i seek your comment on the case below .
ABC LLC ( file Tax return form 1065 ) has 3 members, ABC LLC only asset is a piece of vacant land .
ABC LLC -Equity as of 12/31/2017:
Member A has 1,000 LLC UNITS
Initital Capital $1,000.00
Allocated Earnings -200.00
Member A Equity= 800.00
Member B has 2500 LLC UNITS ,
Initital Capital $2,500.00
Allocated Earnings -500
Member B Equity= 2,000.00
Member C has 4500 LLC UNITS .
Initital Capital $ 4,500.00
Allocated Earnings -500.00
Member C Equity =$4,000.00
In 2018, Member B wants to sell his total 2,500 LLC units ( sell membership interest ) to a new party ,outsider , which is D.
How would we resolve the negative balance of B's allocated earnings that resulted from the previous years' losses?
How would the accounting transaction like ? does the below accounting journal correct ?
Debit Capital B $2500
Credit Capital D $2500
Debit earning D $500
Credit earnings B $2500
Or can Member B put in cash $500 back to ABC LLC to make the earning zero before selling his membership to D ?
If Member B put in $500 into ABC LLC, should the journal entries be
Debit Bank /cash $500
Credit Earnings B $500
Must all other members ( A &C) also put in money equal to their negative earnings to make their earnings ZERO before B sold her membership to D.
Appreciate your help and thanking you in anticipation