Any other business owners out there?

[Boca Vol]

I have an S Corp and am considering taking a personal loan from the company...complete with a signed promissory note, pay schedule, etc.

Have any of you ever done this? From what I've researched it's perfectly legal if the loan is repaid to the corp....but I'd rather not have to deal with an audit if this is one of those things that triggers one.

 

[Thunder Good-Oil]

I have an S Corp and am considering taking a personal loan from the company...complete with a signed promissory note, pay schedule, etc.

Have any of you ever done this? From what I've researched it's perfectly legal if the loan is repaid to the corp....but I'd rather not have to deal with an audit if this is one of those things that triggers one.

Arm's length transactions s/b fine. Below market interest rates could get the IRS saying there s/b more revenue to the partnership and also not charging enough interest is compensation to the loan recipient. But I'm not a tax or a compensation accountant.

 

[GAVol]

I'm an LLC, but as long as it's an arm's length transaction, I think it's fine. Just make interest payments to show that you're servicing the debt.

 

[Boca Vol]

Thanks guys. The S corp is owned by my wife and me. Can an arm's length transaction still exist if there is a promissory note, repayment schedule with interest, proof of monthly payments, etc.?

 

[InVOLuntary]

I own a c Corp. I've had to Loan money to the company and have taken loans from the company too. My account has never had a problem with it.

 

[Boca Vol]

I've own a c Corp. I've had to Lian money to the company and have taken loans from the company too. My account has never had a problem with it.

Thanks for the info.

 

[Thunder Good-Oil]

Thanks guys. The S corp is owned by my wife and me. Can an arm's length transaction still exist if there is a promissory note, repayment schedule with interest, proof of monthly payments, etc.?

I'd be sure that the interest rate is close to the current rates that a bank would extend for an unsecured loan. Be sure to include the interest as revenue on the partnership return... which kind of sucks since you won't be able to deduct it on the personal tax return.

 

[Boca Vol]

I'd be sure that the interest rate is close to the current rates that a bank would extend for an unsecured loan. Be sure to include the interest as revenue on the partnership return... which kind of sucks since you won't be able to deduct it on the personal tax return.

Good points...thanks for the help.:good!:

 

[McDad]

My wife and I did this. Business (C corp) loaned us money for car. We drafted a loan and signed it as officers of company and borrowers. Also printed an amortization schedule and that packet was given to CPA. We put the payment from her personal account into the business account on auto draft. Perfectly legal. Be aware though, if you try to show zero profit at end of your tax year with deductions, payout to shareholders, making large purchases, etc, the corporation has no money (by irs standard) to loan out. And that is no bueno. As long as the corp has profit you can do the loan.

 

[Thunder Good-Oil]

My wife and I did this. Business (C corp) loaned us money for car. We drafted a loan and signed it as officers of company and borrowers. Also printed an amortization schedule and that packet was given to CPA. We put the payment from her personal account into the business account on auto draft. Perfectly legal. Be aware though, if you try to show zero profit at end of your tax year with deductions, payout to shareholders, making large purchases, etc, the corporation has no money (by irs standard) to loan out. And that is no bueno. As long as the corp has profit you can do the loan.

It's an "S", not a "C". Any profit is a pass through to the partners.

 

[Boca Vol]

My wife and I did this. Business (C corp) loaned us money for car. We drafted a loan and signed it as officers of company and borrowers. Also printed an amortization schedule and that packet was given to CPA. We put the payment from her personal account into the business account on auto draft. Perfectly legal. Be aware though, if you try to show zero profit at end of your tax year with deductions, payout to shareholders, making large purchases, etc, the corporation has no money (by irs standard) to loan out. And that is no bueno. As long as the corp has profit you can do the loan.

This is exactly the scenario I'm looking at. Thanks for the explanation.

It's an "S", not a "C". Any profit is a pass through to the partners.

Exactly. I just reviewed my personal and corporate taxes and sure enough the difference between the beginning and ending balance in the business checkbook was added to our personal taxes.

 

[McDad]

It's an "S", not a "C". Any profit is a pass through to the partners.

He stated that in the first 4 words. My word-eye-brain thingamajigs no work so gooder.