What are my management fees and how do I pay them?

You have a management corporation, whose sole business is managing the LLC. The LLC pays the corporation two types of management fees on a quarterly or annual basis. The first part of these fees is for any administrative duties the corporation performs for the LLC. This fee is a set rate per month regardless of the LLC's profits.

The second part of the management fees is for trading done by the corporation for the LLC in the LLC's brokerage account(s). This fee is a percentage of the trading gain in the LLC's brokerage accounts. If there is no income from the trading account then this fee will not be paid.

These fees are paid directly from the LLC to the corporation and because they are expenses to the LLC you do not take any money out for the other members of the LLC. You have setup the amounts for both parts of the management fees in your coaching calls and the details can be found in your LLC's binder on the appointment of manager and management agreement.

What is the accounts payable line on my balance sheet and what does it mean?

The accounts payable line on your balance sheet represents money owed to you from the entity(s). Accounts payable is any expenses paid by you, out of your personal account for the entity. Your entity expenses the amount on the date you paid for the cost personally and then has eleven months to reimburse you. You can take all or part of the accounts payable amount out of your entity at any time within these eleven months. Also if you are not reimbursed within the eleven months, the accounts payable turns into a long term liability and the entity will owe you interest on the amount owed.

How do I take distributions out of my LLC?

Anytime you distribute money out of your LLC, that is not a reimbursement or a payment of management fees all of the members must take a distribution at one time. Each member must receive a separate distribution based on their member percentages, and distributions are generally not considered income on their personal tax returns. For example, let's say there are two members in the LLC and member A owns 25% and member B owns 75%, and a total of $1,000 is taken out of the LLC. Partner A will receive a check for $250 and partner B will receive a check for $750.

How long should I keep my business records?

You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitation for the return(s) runs out. The period of limitation is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date. Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.

What is the accrual method of accounting?

Under an accrual method, you generally report income the tax year you earn it, even though you may receive payment in a later year. You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year.

What is the cash method of accounting?

Under the cash method, you report income the tax year you receive it. You usually deduct or capitalize expenses in the tax year you pay them.

How to read a Balance Sheet

Assets
Assets are typically broken down into two types. The first type, current assets, is the firm's assets that are most liquid. An asset is liquid if it can quickly be turned into cash with little loss of value. Other current assets include accounts receivable, inventory, and those assets that are considered cash equivalents such as shares of stock in another company. An asset is generally considered current if it is expected to be turned into cash within one year from the date of acquisition.

The second type, fixed assets, is the firm's assets that are least liquid. In the market, they cannot be quickly turned into cash without a significant loss of value. An asset is generally considered fixed if it is expected, at the time of acquisition, that it will not be turned into cash within one year. In fact, many fixed assets, such as buildings and land, are expected to stay on the company's books for the life of the company.

Liabilities
Like assets, liabilities are broken down into two types. The first type, current liabilities, is the firm's liabilities that are expected to mature within one year. However, unlike assets, the maturity of a liability represents an outflow of cash rather than an inflow. Current liabilities include accounts payable, notes payable, and accrued expenses which are liabilities for which a good or service has been received but not yet paid for. The second type, long-term liability, is the firm's liabilities that have a maturity of more than one year. Long-term liabilities often represent a major source of capital and funding for normal operations of a corporation.

Owners' Equity
Owner's Equity (sometimes called shareholders' equity) is the total value of the company's stockholders and represents the second major source of capital for operations. This part of the balance sheet is comprised of the value of preferred stock, common stock, and retained earnings from operations. Owners' equity is whatever is left over after the value of liabilities has been subtracted from the value of assets.