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Accounting for an LLC as member of another LLC

Forum|Forum|3 months ago
March 20, 2026
2 replies
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I have an LLC, let's call it LLC-A, which is a member of another LLC, let's call that one LLC-B. Both are multi-member LLCs. LLC-A receives a K-1 from LLC-B.
LLC-A periodically receives share income from LLC-B (which is booked against retained earnings in LLC-B). I'm clear on how LLC-B accounts for these payments, but what I'm not so clear on is how LLC-A characterizes these payments. In the past I have put them into an income account in LLC-A.

This has worked out well enough. My concern is that LLC-A has not been tracking the retained earnings in LLC-B, basically the capital account of LLC-A in LLC-B does not appear on the books of LLC-A.

How should I track LLC-A's capital account at LLC-B within LLC-A's book? An asset account? If so, which type? And how is the additional asset resolved on the balance sheet?

I am using QB Desktop Pro Plus.

Thanks in advance,

Lori

QuickBooks Desktop

Best answer by Rainflurry

@Lori-RA

LLC-A should have an Other Asset account called 'Investment in LLC-B'. Income received by LLC-A from LLC-B should be booked to an Other Income account called 'Investment in LLC-B Revenue'. LLC-A should not have the R/E of LLC-B on its books.

L

Lori-RAAuthor

Anyone? Bueller? Bueller?

C

Candice14

Level 8

Good afternoon, @Lori-RA.

We appreciate you coming to the Community with your questions.

With the details and particular questions you asked, we recommend consulting with an accountant to be sure of the answers for your business. They'll be able to give you the best advice based on how you run your business.

If you don't have an accountant, check out this link to find one near you.

If you have any other questions or concerns, feel free to reach back out. Have a great day!

RainflurryAnswer

Level 11

@Lori-RA

LLC-A should have an Other Asset account called 'Investment in LLC-B'. Income received by LLC-A from LLC-B should be booked to an Other Income account called 'Investment in LLC-B Revenue'. LLC-A should not have the R/E of LLC-B on its books.

L

Lori-RAAuthor

Thank You!

How do I get/track amounts into the LLC-A/Investment in LLC-B other asset account? I'm thinking that this is the value in the R/E account of LLC-A, yes?

Rainflurry

Level 11

@Lori-RA

The 'Investment in LLC-B' other asset account reflects the investment made by LLC-A in LLC-B. LLC-A had to invest something in LLC-B for this account to exist. For example, if LLC-A made an initial cash investment of $50K in LLC-B, then the Investment in LLC-B should have started with a balance of $50K. That $50K is the basis of your investment in LLC-B. Nothing increases that balance unless LLC-A invests more into LLC-B, or if LLC-B doesn't distribute its profits to LLC-A. In both cases, the balance will increase in Investment in LLC-B with the offset to Investment in LLC-B Revenue. Investment in LLC-B other asset will decrease if you sell a portion of your interest in LLC-B or if LLC-B has a loss.

If LLC-A didn't contribute anything to LLC-B, then the Investment in LLC-B other asset account shouldn't exist.

When LLC-A receives its share of income from LLC-B, that is booked as cash, with the offset being the Investment in LLC-B revenue account. That has no impact on the Investment in LLC-B other asset account.

R/E is indirectly related to the Investment in LLC-B other asset account. R/E of LLC-B decreases as a result of the payment made to LLC-A, and Revenue from Investment in LLC-B increases R/E of LLC-A, but only because those payments decrease/increase net income for the respective LLC, which QB automatically closes to R/E at year-end.

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