Borrowing Money From Your Business

The business is meant to give your life financial freedom and that is the reason why people try so hard to make sure that their business is running smoothly and expanding successfully. This is completely true but still they are bit of complexities attached to this. When your business is eventually running successfully and smoothly there are some obstacles you face to take out money from it for your own personal finance. However, you can go for taking personal loan showing the strength of your business.

The rate of interest is normally low if you are borrowing a loan from the company you own and if the loan amount is less than 10,000$. The rate of interest may also be 0% for this amount but if you are borrowing more than 10,000$ then be ready to cough out some amount of money as interest but there is nothing to worry about as this amount is also not a big sum. The rate of interest that is charged for the loan above 10,000 $ can be favorable but not extremely low as these rates are monitored by Internal Revenue Service.

The loans you take from your own company should have reasonable rate of interest as well as terms. A loan of personal nature with around 100 year repayment term cannot be expected to be called a loan at all. The IRS will regulate the loan and charge the fees applicable in these cases. It's required you go by the norms which are set up and move ahead accordingly in taking loans.

There won't be any hassles to go through of filing an application like you need to while going for a loan from bank and neither a need of any credit cards. Your loan from your company would be sanctioned immediately without any delay.

There is no need of any kinds of collaterals when taking a loan from your company as needed in other cases like when taking loan from a bank. You do not have to put any other assets at risks in these loans and can use the same in other uses.

The IRS which is the chief body in the cases of loan will determine whether or not your loan is secured or insecure in nature or actually just distribution.

Loans do not fall inside the column of welfare benefits plans or pension plans when they are given to corporate executives for Employment Retirement Income Security Act (ERISA) propaganda. There are still however few disadvantages of borrowing from your company.

It is a must to go by the rules set by IRS and even though tax rules look a bit complex it's necessary to by them. This just might increase the cost which is levied for loan and debt management. You just might fall in to big problem if you can not document a loan properly or fail to structure a loan which is reasonable in nature. There is a need of promissory note to be duly signed by you which states the loan amount, rate of interests and terms and conditions. The amount of money you pay as interest is your company's profit and the tax is levied accordingly against it but this won't be the case if the loan amount is less than 10,000 $.