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Wait, so which was it – he used $5000 of his own money or the company's? I'm surprised loaning money from the company is legal in the U.S., it's certainly not
by mstade 9y ago
Wait, so which was it – he used $5000 of his own money or the company's?
I'm surprised loaning money from the company is legal in the U.S., it's certainly not here. Probably because then you can fairly easily create a tax evasion scheme where you never pay yourself a salary and just keep borrowing money at zero interest and payment due long about five years after the sun explodes...
- BrentOzar 9y ago> Probably because then you can fairly easily create a tax evasion scheme where you never pay yourself a salary and just keep borrowing money at zero interest and payment due long about five years after the sun explodes... It's legal here in the US, but there are rules around minimum interest charges. I dealt with this during a partner buyout - the payment schedule HAD to have interest involved or else it was considered a fishy loan. https://www.law.cornell.edu/uscode/text/26/7872 https://www.law.cornell.edu/uscode/text/26/7872
- fyfy18 9y agoI don’t know where “here” is, but in the U.K. it’s perfectly legal. You can even give yourself (as a director) an interest free loan. However if the amount owed is greater than ~£10k(?) at the end of the corporate tax year, you need to pay it back within 9 months or it’s treated as income and taxed accordingly (there’s also regulations about paying it off before the end of the corporate tax year and taking out directly after). Still 21 months for an interest free loan isn’t bad...
- chx 9y agoI wonder what "here" is, in Canada, generally, when you borrow funds from your company and don't repay it within one year, the CRA can assess the outstanding balance as ordinary income at an income tax rate similar to that of a salary.
- charlesdm 9y agoWhere do you live? This is pretty much legal wherever, as long as you pay market rate interest rates on said loan.