Currently I’m working on a model that where the capital account of a LP has been reduced into the negatives due to initial losses. At what point can the LP start receiving distributions? Does the profit share have to remain in the company until the capital account is over $0?
Eg: Starting Capital Account: ($40,000,000) Share of Contribution: $500,000 (First quarter of profitability) Share of Distribution: $500,000 Ending Capital Account: ($40,000,000)
Do we have to wait until the contributions gets the capital account back up to $0, before taking distributions?
Many thanks