A capital account is sometimes referred to as an owner’s equity account, and it’s an account comprised of all assets and cash which are part of your business. This might include property, accounts receivable, equipment, and actual cash, but it will always include all the physical assets associated with the business.
Deposits and Withdrawals from a Capital Account
You can add to a capital account by several different methods, starting with any initial contributions you made when the company was founded, or later on once you have already been conducting business. When additions to a capital account are made after the initial founding, it will generally be at the end of a given fiscal year. This is also the time when any withdrawals can be made from a capital account, for instance, distributions that might be taken by the owner for personal usage.
Types of Contributions
The first type of contribution is the initial contribution made when a business is starting up, and this is known as a capital contribution. When such contributions are made, it increases the equity interest of the owner, which in turn increases the amount of capital that can later be withdrawn. Other assets can be contributed to the account as well, for instance, company vehicles or other equipment, office equipment like computers, and other physical assets that have significant value.
There are generally restrictions on how much can be withdrawn from a capital account, and these restrictions will follow the governing documents which were drawn up when your business was founded. For instance, the rules for how much you can withdraw from your capital account are different for partnerships, LLC businesses, and either S-corporations or C-corporations. The best way to think of a capital account is an account that holds all equity the owners have in a business, and this account can be added to or subtracted from at any point during the life cycle of the business.
Could Your Capital Account Stand Some Bolstering?
If your capital account is pretty thin and inadequate to manage your business, we may be able to provide financial assistance. Contact us at OneClick Commercial Funding, so we can explore with you the possibility of providing help for your capital account.