Classifying Loans

[chrislarson1967]

Is it possible to loan money from an LLC to a C Corp? On the C Corp side it would be debt and can be used as working capital. Payments would be made and the interest can be an expense. On the LLC side it would be an asset and the payment would be principle (re-imbursement) and interest would be income. Would the revenue generated in the LLC to create the loan be taxable income or because it was not an owner draw, rather loaned to the C Corp, be an expense? The goal would be to continue to take payroll from the LLC but the additional income be lent out to the C Corp to use as working capital for Real Estate investing or equities. Any profits from the C Corp would be held in retained earnings until a future date (like retirement) and pay income tax then.

[ThomasM125]

You can loan money from an LLC to a C Corporation. Interest received by the LLC would be interest income that would flow down to the partners to be entered on their individua tax returns as interest income. The money earned by the LLC to generate the loan would be taxable to the partners. The loan would not represent a deductible expense as it would be paid back over time, so it is an asset as you mention. Certain assets that create deductions are fixed assets such as furniture and equipment that wear out over time, so you can deduct the cost of them through depreciation.