Legal, Tax, and Accounting May 12, 2020

Invest or loan in your own corporation?

Abhishek Sharma @abhisharma

Hello IH,
I am planning to put some money into my company account. I know I can term this as "investment" or "loan". Let us say this amount, for now, is $2K.
I am trying to understand the steps in this transaction. So for example:

  1. Keeping record of cash credit in the company account.
  2. Do I need to come up with a new contract between corporation and myself about this transaction? Like if I call this as an investment.
    and so on.

I want to be sure I am following the right steps. I am in an early phase and do not an accountant.

Looking for helpful responses.

Thanks

  1. 1

    You need to decide how to ascribe the transfer of the money to the company's benefit.

    If an investment there may be tax benefits if an investment and there might also be benefits if it is a loan.

    If you transfer the money without a record of it, and you decide to repay yourself (or repay yourself with interest) then when it comes to doing your accounts you will need to decide how to phrase this transaction and also have it documented. Hence, why you should have it documented up front.

    As set out below -it's based on your location and tax laws. I am not aware of position in Canada.

  2. 1

    I think this will strongly depend on the country. Is your company in Canada?

    1. 1

      Yes, Nova Scotia, Canada

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