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Los Angeles, CA

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An LLC's capital accounts allow the company to maintain an accurate accounting of each member's contributed cash or property: They are "running totals" of the members' ownership and investment. When forming a limited liability company, each member contributes a certain amount of cash or real property to the company. Often, although not necessarily, the amount each member contributes at the beginning forms the basis for his ownership. If two LLC members each contribute $50,000 to start a business, they will typically each own 50 percent of the business. Periodically, capital accounts are adjusted up or down to reflect profits or losses to the business, in accordance with each member's ownership and the terms of the operating agreement.

Capital Account (LLC)