If Company A loans another business (Company B) money is the LOAN itself treated as a business expense for Company A?

[eleben]

There are no shares exchanged between the companies just a simple loan with interest and a payback term of a few years.  Is the LOAN itself treated as a business expense for Company A (LLC) and if so where is this reported on Form 1065?

[ChristinaS · Accepted solution]

A loan is a balance sheet item, not an income statement item. A loan is not an expense, and does not impact the net income/ loss. Only interest income hits the income statement/ 1065 income reporting.

Is the LLC required to complete the balance sheet (1065, Schedule L)? You are generally not required to do so if receipts under $250k and assets under $1 million.

If so, a loan reduces the cash on hand and increases Notes/ Loans Receivable. You may also need to accrue interest income and a receivable for that.

[BenjaminVN]

Hi,

We have 2 companies (no linked - supplier/customer relationship): one manufacturing and one for distribution. The distribution Company is not profitable yet, so to finance its activity, we would like to convert all the invoices not paid to the manufacturing Company into a loan. What will be the impact for the manufacturing Company ? Can we deduct these invoices from the turnover ?

Thanks,

[BillM223]

@BenjaminVN

As Christina point out above, this is not an expense item; rather loans are a balance sheet item. You don't "deduct" anything, except interest paid on the loan.