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Can my corporation give someone a personal loan?

3K views 5 replies 5 participants last post by  andrewf 
#1 ·
I have a small business that's incorporated, with me as the only shareholder. I'm currently preparing to give a $20,000 loan to a person I know. Can my corporation legally give her the loan, or do I have to do it personally instead?

I'm charging interest on the loan and will obviously claim that, but I figure it makes more sense to have the business claim it rather than me, if possible. Perhaps there would be other benefits to doing it one way over the other, but I'm not sure.

Thanks for any thoughts you may have!
Phil
 
#4 ·
I would disregard both of those links, as they are relating to Shareholder loans.

There is nothing wrong with giving a personal loan to somebody through your corporation. It is probably best to draft your loan agreement through a lawyer. As long as you are charging market interest rates, and are claiming all of the related income, then there is no problem.

If you have a loan agreement, and are charging interest, then you will also be able to write off the principal balance of the loan if for some reason it is no longer collectible.
 
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