Negative equity

[ILLMAS]

Let's say Joe & Larry are partners (1065) for the last couple of years they have been developing a product and have incurred expenses but no income what's so ever, their capital is negative and they have been loaning money to the partnership to cover expenses.  Yes this has produced loses over the years to each partner, what options do these partner have to come up to zero?    

[Lion EA]

Profit. Additional Paid-In Capital. Maybe -- sell an interest to a third partner?

[Lee B]

They want to call their funds loans but in reality they have made capital contributions, which for tax purposes is the better way to go.

[Abby Normal]

Agree with cbslee. Track all the money in and out in the capital accounts.

[ILLMAS]

40 minutes ago, cbslee said:

They want to call their funds loans but in reality they have made capital contributions, which for tax purposes is the better way to go.

Sounds similar to this:  A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.