GETTING YOUR MONEY BACK OUT OF A CORPORATION

[patriciacw]

Can anyone please advise me about the corporate accounting details of

re-covering your original dollars input to place a down payment. Does that qualify as a LOAN?

I know that there is something about waiting for 18 months before you can withdraw it? Can the down payments be recorded as Loans to the company (rather than as Owner's Equity), so that you can have a repayment of your loan later?



Or must they stay in the corporation as Owner's Equity, locked in, and not removed unless the property is sold?

If so, would this mean that the only loans possible would be for things other than down payments?

Or would it be possible to re-claim the down payment as a loan, if it were entered as a loan to begin with.



Is it not possible at some point to remove your down payment equity and let the corporation stand on it's own feet?



And... there is something about depositing money every so often as a loan, and then withdrawing again right away, so that you can re-claim earlier loans on the 18 month cycle?



Any help is appreciated.

Everyone having fun?

 

[Thomas Beyer]

Money into a corporation is either equity or a loan, at your discretion.



Money out of a corporation is either: a loan, a repayment of a loan, a dividend, a management fee or income.



To seed a company with cash, it is common to have a small equity investment, say $10 or $100 to purchase shares, and the rest a loan, say $99,990. The main benefit is that the loan can be taken out tax free until it is 0, whereas otherwise you'd take a dividend and pay taxes on it personally.



A corporation can also lend you money, but if taken out longer than a year it is usually deemed income to you, and thus taxed personally.

 

[patriciacw]

Thanks very much for taking the time to reply

 

[Sherilynn]

There is no waiting period for your corporation to repay a shareholder loan. In your books, you may want to show it as a shareholder draw and then let your accountant advise you at the end of the corporate tax year as to how to account for it (shareholder loan repayment, corporate loan to you, or salary). Then the accountant can make the appropriate adjusting entry.

 

[2shoes]

I realize this is an old thread, but stumbled across it in a search and still very relevant.



My question pertains to seeding a Corp with cash (as mentioned by Thomas) and accounting for it after the fact. If we gave our Corp say $50K as downpayment on a property a year ago, can we call that a shareholder loan now (or when the property is sold), or are we committed to owning the shares and paying tax when the $$ eventually come back to us personally? Our accountant didn't offer any such options at the time.

Mark