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    1 Reply Latest reply on Mar 17, 2008 7:36 PM by Lighthouse24

    Loaning personal money to your business

    LostBoy Newbie
      When your business is low on funds and you need to quickly add funds to it's account what types of paperwork should accompany it?
      Should there be a simple contract written stating that the company is borrowing your money and that you expect to be payed back the full amount at some point?
      My business have been low on funds a few times and I've just transfered money or deposited a personal check. This business is an LLC with two members and we both understand that the money is being borrowed. I can just write myself a company check when there are sufficient funds but is it a good idea to continue this process? Are there any foreseen issues in the future?
        • Re: Loaning personal money to your business
          Lighthouse24 Ranger

          As an LLC member, you can put value into the business by lending the LLC money, or by contributing capital to the LLC. You can take dollars out by taking a repayment of the loan (plus interest), or by taking a distribution of profit. I'd think a simple loan document or contribution agreement would provide adequate paperwork.

          I can't think of any "unforeseen issues" associated with the practice . . . except there may be times when the LLC should borrow as a business entity (even if the member has to personally guarantee it) instead of borrowing from the member directly -- simply to build credit in the business' name. Utilizing business credit cards or credit lines to cover those periods of "low funds" might also be an option that helps achieve the same end. Another possible reason to consider this option is that with a business loan from a third-party, the interest would be deductible -- but in effect it isn't when you're just paying it to yourself.

          Hope this helps. Best wishes.