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Tilden Moschetti: One term you
oftentimes see in private equity

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funds documentation, or in
documentation for syndications

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is a term called capital
account. So what exactly is a

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capital account? And how do you
use

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it My name is Tilden Moschetti.
I am a syndication attorney with

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the Moschetti syndication Law
Group. One of the things I

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really enjoy most about my job
not only is working with the law

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and working with great clients,
but I also get to work on things

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in finance. So finance is
another one of my passions, I

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love studying it, I read finance
books, even read accounting

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books, because the two go hand
in hand. So one topic that

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oftentimes comes up lets me talk
about it more than more than

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ever, to my clients. And that is
what does this term mean capital

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accounts? So for example, a lot
of times we talk about an

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initial capital account for your
members or for your investors.

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What is that? Or what are these
other accounts that are getting

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set up? What is a capital
account anyway? Well, let's

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break it down. So capital
obviously means money. So it

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means cash. These are the cash
accounts that we use in order to

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manipulate things and our
counts. We don't mean bank

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accounts. That's an account
specifically in a bank. When we

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talk about capital accounts,
we're talking about accounts as

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it relates to accounting. So an
account is just like a group of

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grouping of funds that we can
keep track of. So sometimes

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you'll hear accountants talk
about a chart of accounts, that

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can be a list of different
accounts. So you might think of

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it as a budget item, like you
have your mortgage and that goes

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into your your mortgage, on your
blog, excuse me on your budget

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item. Or you think about
groceries, you know, things like

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that are are parts of your
budget. for accounting purposes,

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we talk about them as accounts.
So it's that pool of money

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that's set aside or that's
segregated for a specific

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purpose. So a capital account is
that cash that separate aside

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for a specific person, that each
investor has a capital account,

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so we keep track, if an investor
invest $100,000, we logged log

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$100,000 in their capital
account, that's their initial

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contribution, that is their
initial capital account. Now

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that money can come up or it can
go down based on different

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things that take place. If we
make a distribution of a get as

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a return of money, that can
reduce the amount of their

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capital account, that's we still
I oftentimes still call the

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initial capital account, even
though it's not initial anymore,

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but it's reduced that amount
that they have cash that they

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have as pure equity in their
accounts. So I hope that's been

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helpful. But let's talk about
some key takeaways before we

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leave for today. Key takeaways
are capital accounts are those

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accounts that keep track of the
capital in the LLC that always

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start at zero and are adjusted
through those contributions,

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distributions, taxable income
and taxable losses. Both both

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the company's capital accounts
and the investors capital

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account need to end at zero. So
your final distribution at the

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very end of the day should be
zero. capital accounts are

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oftentimes very confusing and
keeping track of them,

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especially in that first year.
And especially if you have

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different distribution periods
for each investor. Some of my

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investors like to only get
distributions annually, some of

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them get it quarterly. And it
can get confusing on which is

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which because we have to build
different accounts. I also keep

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track of a preferred balance
account, which is an account

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that keeps track of any monies
that they've made that they

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shouldn't be receiving because
of a preferred return, but they

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haven't received yet. And
lastly, again, those cash

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contributions, those cash
distributions, reporting taxable

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income and reporting taxable
losses, all of those, they

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impact the capital accounts. My
name is Tilden Moschetti. I'm a

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syndication attorney with the
Moschetti syndication Law Group.

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We can help you stay in
compliance with the SEC, make

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sure that everything's right.
Keep your investors happy. All

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those things. Start with a good
legal framework. That's what

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we're here for to make sure that
we help you be successful as a

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syndicator or a private equity
fund manager.