3 ms·

What's a " 51% recourse promissory note"?

• mrajcok 9y ago
  Instead of paying for the shares with cash now, I agree to pay for them in 10 years, paying interest at the minimum rate the IRS will allow (~2%). The 51% recourse means that the shares themselves are the only collateral for 49% of the loan amount (to limit my risk if the company goes bankrupt and a creditor tries to actually collect on the note).
  • ant6n 9y ago
    Interesting. Why not use the shares as 100% collateral?
    • mrajcok 9y ago
      The IRS will treat it as an option rather than a purchase if the shares are the only collateral, resulting in worse tax treatment.
    • deleted 9y ago
      [deleted]