How are people handling fees for limited partnerships?

cdenny Member ✭✭
edited October 2022 in Investing (Windows)
I'm trying to use the new Partnership categorization for investing. What I haven't gotten a handle on is management fees. For instance, say you have a capital commitment of 50K, but 10K goes to management fees for 10 years.

How are people showing that 10K fee? Currently i'm showing a loss of 10K even though it was never invested.



  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited September 2022
    I take it that you send them $50K, that you're locked in for 10 years before you can liquidate, and that every year of that 10 year stretch the managers are going to take $1,000 out of your Partnership Capital Account?
    "Currently i'm showing a loss of 10K even though it was never invested"
    That needs some explanation.  In a typical partnership situation if you put $50K into the partnership then the partnership records an entry along the lines of:
    Debit (increase) Partnership Checking Account      $50,000          (deposit your money
    Credit (increase) cdenny Partnership Capital Account $50,000   (create your capital account)
    Is the partnership actually reporting this to you in a different fashion, e.g., opening your capital account to the tune of $40K and taking the $10K for the Managers?  If that's the case are they telling you if the partnership folds somewhere along the line before 10 years you'll get a pro-rated refund of the of the $10K?
    The actual "mechanics" of accounting for this on your records depends somewhat on how the the partnership itself accounts for these transactions, and reports them to you, on their records.  If the partnership opens your capital account for the full $50K and then effectively accounts for the annual fee along the lines of:
    Debit (increase) "Fee Paid to Outside Managers"  $1,000             (an expense to the partnership)
    Credit (decrease) "cdenny Partnership Capital Account $1,000    (a reduction in your equity)
    then one way of handling this is that each year you record a $1,000 Return of Capital entry for the limited partnership, then expense the cash that creates in your Quicken Account against a management fee Category. 
    I have no idea if the new "Limited Partnership" aspect of Quicken has some way of handling this - I'm a cautions, slow adopter - but given my assumptions the above sequence should work for any "investment."
  • cdenny
    cdenny Member ✭✭
    It's a 10 year limited partnership with a 1 time call on the management fees (10 years worth). As exits occur in the fund any money generated is returned to the limited partners up to the full capital amount invested (in my case 40K plus the 10K in fees). Afterwards any additional cash out of the partnership is split 20/80 (managers/partners). Obviously, this highly speculative and yes, I could only get a prorated return of my capital investment (fees and investments) if it folds early.

    I'll have to do some thinking, but you've given me some ideas. Thanks!
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    So it sounds like the loss of the 10K fee is somewhat contingent.  I'd probably just make the basis for the investment the full $50K and deal with any shortfalls down the road.
This discussion has been closed.