4 ms·
How does one self-fund a startup properly?
I have a startup (set up as an S-Corp) I want to add some of my personal funds to, but I want to know the best way to go about it. If I pay myself with equity can I create additional shares, or do I have to transfer shares? If I consider it a loan to the corporation, do I need to specify terms of repayment?
Any websites that go over this for the self-funder, or person seeking a family and friends round?
- cd 18y agowww.alltop.com, there are few interesting and aggregation of various articles which help startups.
- ScottWhigham 18y agoNo clue for an S corp but I'm saving this for later so I can read some smart person's answer :)
- coglethorpe 18y agoMaybe I will need to repost this on Monday... So far no answers...
- epi0Bauqu 18y agoI have a number of self-funded startups, and it is a case by case decision on what to do. IM me if you want to discuss.
- skmurphy 18y agoLoan the money in, it's easier to get it back out (the corporation repays the loan) and you can recognize a loss more easily. Setting a term, a reasonable interest rate, and specifying that you will get a single balloon payment at the end of the term is an easy way to go. Put this into the minutes of a board meeting and get a signed document from all board members (if only yourself). You should only put money in that you need for operations, any early salary to yourself is better paid directly out of savings (value is recognized in the "sweat equity" you have from the startup and avoids taxes on roundtrip into and out of the Sub-S as wages/dividends). Happy to chat, my contact info is in my profile; I am not a lawyer or a CPA (both of whom you should already have if you are incorporated) but we've helped a number of early stage software firms with formation strategy issues like these.