Loans From or To Related Parties

Sometimes to get along, you have to get a loan. The Company may need funds, and you may lend some of your personal money to your Company. This is perfectly legitimate, but make sure there is a written promissory note, with some reasonable interest rate, and some reasonable payment schedule.

It can go in the other direction. You may need money and borrow from your Company. This is trickier, because you have to decide if you are paying yourself payroll, or paying yourself distributions or dividends, or having the Company lend money to you. If it’s a loan, make sure there is a written promissory note, with some reasonable interest rate, and some reasonable payment schedule.

If it is possible to pay off one or more of these loans before the end of the year, do it. It will clean up your balance sheet and keep the IRS auditors from questioning these types of transactions.

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