BORROWING CASH FROM YOUR BUSINESS
There are a wide variety of benefits you can enjoy
when borrowing money from your business. But, in order to maximize
your borrowing power, it is important that you understand
business loans work.
- If you business is well established it is an
excellent option. If you are a new business, consider a
- Utilizing a mortgage or bridge loan to aid in the purchase of a
- Pay for your child's private school or college.
- Paying unexpected taxes, medical costs, family situations, divorce
- Buy life insurance
- Purchase a new vehicle, second home, or some sort other high
ChoicePersonalLoans.com offers a variety of
for every need and purpose.
What advantages are there when borrowing from your company?
Interest rates associated with business loans are very low, 0% in
When borrowing from a company that you own, you will obtain very
favorable interest rates. If loans of $10,000 and less, you can
likely borrow interest free. Loans that are for more than $10,000
rates are still reasonably low. When rates are below the applicable
federal rate established every month by the Internal Revenue Service
(IRS), they will be attributed under a group of IRS rules.
Attractive terms - The trick hear is to structure a
loan that is reasonable. For example, a loan with a 100-year term is
not going to be looked at as a loan by the IRS. They will deem it as
distribution and tax you. Develop a loan with favorable terms,
but do not be a pig about it.
No application process - When you borrow money from
your company, you do not have to go through any sort application
process. In addition, no credit check is required. This means you
will get your cash fast!
No collateral required - Banks usually require some sort
of collateral when you borrow from them. The equates to not having
to put your home or any assets at risk.
Regardless if your business loan is secured or
unsecured, it is important to remember that there are factors that
the IRS will examine when
determining if your loan is a distribution or not.
What are the downsides of borrowing from your
It is important that you follow
business loan tax rules - Tax rules are hard to
understand; increasing the administrative costs of managing the
loan. You will be looking at trouble if you neglect to correctly
document your loan or structure your loan unreasonably based on
current market conditions. A signed promissory note
including details regarding the amount loaned, the interest rate ,
and the term will be required by you and the company. As mentioned
above, if the loan amount is under $10,000, the interest rate is
zero, but not sole intent of the loan is to avoid federal taxes.
When deciding if a loan should be labeled as a dividend distribution
for tax internet, the courts and IRS will look into the following
- Does the loan agreement put a cap on the sum being advanced?
- Was security established for the loan?
- Was the shareholder in a position to pay off the loan?
- Was a payment schedule developed and maintained?
- Is there a maturity date?
- Was there interest charged?
- What is the borrowing amount?
- How much control does the shareholder control the business?
- What are the dividends and earnings history of the business?
- Was there execution of a promissory note?
Very important! The interest you pay on the loan is considered
income to the company and will be taxed as such.
Handling Business Debts
Keeping Business Debt & Personal Debts
Preparing for a
How Business Loans Work
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