Posted by John Merchant on July 17, 2008 at 18:07:51:
Sure, this is done all the time and it’s a smart way to do business if possible.
I would document it carefully and be sure the other partner “in the other co” knows about it and is OK with it.
FYI, there are lots of interest free loans by new car dealers, mobile home resellers, etc. A favorite and frequently used ploy is for that reseller of anything to raise the price then advertise heavily that it’s “interest free”.
All quite legal.
0% interest loan from one Company to Another - Posted by Young Success LLC
Posted by Young Success LLC on July 16, 2008 at 17:38:52:
Is this legal to do, if so, what should it do to look legit and how should it be documented? Can One company where the owner is a partner in another company give a 0% loan for an amount of time 12-24 months for 0% interest loan with only a balloon. So basically, a free money loan. Your input is greatly appreciated. Thank You
Re: 0% interest loan from one Company to Another - Posted by Young Success LLC
Posted by Young Success LLC on July 17, 2008 at 20:48:17:
Thank You all for your input! It is greatly appreciated. They are two separate companies. one is owned my an individual while the other is owned in a LLC partnership but no affiliation other than the owner. It sounds ok as long as i write up a note and have everyone sign off. I was just wondering because 0% on cars can show it was a business transaction that needed the financing to close this deal. on a 0% loan with no money, it doesnt look like this is business but more so trying to coverup any earned income on interest for tax purposes. You guys are great. Please let me know if anyone has anything else to add
According to my CPA - Posted by Rich-CA
Posted by Rich-CA on July 17, 2008 at 18:48:02:
Is the second company owned by the first or is all they have in common is an individual who happens to be an owner in both?
In the case where one co owns another, its just a couple of book keeping notations. In the other case, you should write up a loan agreement between the two companies and have the principals sign it in accordance with the rules on who has to sign financial papers in your operating agreement (assuming an LLC) or articles/by-laws (Corp). You will want to make sure the other partners sign off just in case there is a falling out and lawsuit down the road.