Investor Capital Account Statements: What a Sponsor Should Send
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A capital account statement shows one investor's money in the deal for a period: what they contributed, their share of income or loss, what was distributed to them and the ending balance. A sponsor sends it with the quarterly report so each investor can see exactly how their own numbers move, and so the K-1 at year end holds no surprises. It needs the same four lines for every investor, built from the same ledger.
This post is for sponsors setting up reporting before the first distribution. It is general information, not legal or tax advice; the deal's accountant decides how the capital accounts are kept under the operating agreement.
What should the statement show?
| Line | What it means |
|---|---|
| Beginning balance | The ending balance from the last statement |
| Contributions | Money the investor wired in, with the dates |
| Share of income or loss | The investor's allocation for the period under the operating agreement |
| Distributions | Cash paid out to the investor, split by return of capital and profit if the deal tracks it |
| Ending balance | Beginning plus contributions plus income, minus loss and distributions |
| Unreturned capital | What remains to be returned under the waterfall |
| Preferred return accrued and paid | If the deal has one, show accrued, paid and unpaid |
A hypothetical example
This example uses made-up numbers for illustration. An investor contributes $50,000 at closing.
| Quarter | Beginning | Contributions | Income (loss) | Distributions | Ending |
|---|---|---|---|---|---|
| Q1 | $0 | $50,000 | ($1,400) | ($0) | $48,600 |
| Q2 | $48,600 | $0 | $600 | ($1,250) | $47,950 |
| Q3 | $47,950 | $0 | ($300) | ($1,250) | $46,400 |
| Q4 | $46,400 | $0 | ($500) | ($1,250) | $44,650 |
The balance falls because depreciation and fees create tax losses and because distributions are paid in cash. A falling balance does not mean the deal is failing; a table with a simple note ("the balance declines as depreciation losses are allocated and cash is distributed") prevents panic. A year with larger losses, or with a skipped distribution, should show those lines honestly.
Where does the data come from?
- The investor ledger: dates, amounts and wire references for each contribution.
- The distribution ledger: what was paid each quarter and to whom.
- The accountant's allocation of income or loss under the operating agreement.
- The waterfall model that tells you which tier each distribution fell in. See syndication waterfall promote.
If any source is off by a dollar, the statement will not tie. Reconcile before you send.
How often should you send it?
- Quarterly, with the investor report, is the common rhythm. See the quarterly report template.
- Year end, with the K-1, to match Item L. See capital account on a K-1.
- On request, within a reasonable time, because investors may need it for their own records.
Common mistakes
- Mixing tax and book numbers without saying so.
- Showing a total for the whole deal and not the investor's own number.
- Forgetting to include an investor who came in on a later closing.
- Rounding differently from the K-1.
- Sending the statement months after the quarter.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings from their friends and followers under Rule 506(b) or 506(c). After closing, investors see their updates and distributions in one place through investor reporting, payouts go from the deal's Mercury account (by ACH first), and the deal's accountant prepares the K-1s that DoorRaise delivers. The deal's books are kept by its accountant or by the optional Property Books & Taxes service. Fees: $1,500 to set up (non-refundable), then $5,000 a year from closing (only if the deal closes). See pricing.
Capital account, tax basis and what the investor sees
| Number | What it is | Where it appears |
|---|---|---|
| Capital account | The investor's running balance under the operating agreement | Capital account statement and K-1 |
| Unreturned capital | What is still owed back under the waterfall | Statement and distribution schedule |
| Tax basis | The investor's basis for tax purposes, which can differ | The investor's own tax records |
| Market value of the interest | What someone might pay for it | Not shown on the statement |
The statement is a bookkeeping balance, not a valuation. Say so on the page. For how it differs from basis, see outside basis vs capital account.
Related guides
FAQ
What is a capital account statement?
A statement of one member's contributions, allocated income or loss, distributions and ending balance for a period.
Is the capital account the same as what the investor can withdraw?
No. It is an accounting balance, not a cash balance. Withdrawals follow the operating agreement and the waterfall.
Does the statement match the K-1?
The year-end statement should tie to Item L of the K-1, on the same basis. Differences should be explained.
Who prepares capital account statements?
The sponsor, usually with the deal's accountant. The operating agreement sets the method.
Do investors have a right to see their capital account?
Operating agreements usually say they may receive reports. Ask the sponsor or read your agreement.
Should the capital account statement match the quarterly report?
The distribution and capital figures should agree. If they differ, explain why in the report.
Can an investor's capital account go negative?
It can in some structures, for example when losses and distributions exceed contributions. Ask the deal's accountant how the operating agreement treats it.
Sources
- IRS: Partners' Instructions for Schedule K-1 (Form 1065)
- IRS: Publication 541, Partnerships
- ILPA: Reporting Template v. 2.0, suggested guidance
This article is general information as of October 2026, not tax, legal or investment advice. The table is a hypothetical example with made-up numbers, not a projection. Talk to a securities attorney and a CPA about your own deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.