Carl
Level 15

Business & farm

A partner does not "lend" money to a partnership they are a member of. Individual partners make capital contributions of their own money.

If one partner took out a loan and contributed 100% of the borrowed money to the partnership, then that one partner has several choices. They can treat it as their own personal capital contribution if they like.

It can also be treated as a loan taken out by the partnership *PROVIDED* that borrowed money is used 100% for the partnership operation. All those partners making payments on the loan from non-businses money would first make their share of the payment a capital contribution to the partnership. Then the partnership would write the one single check for each loan payment. That way, the partnership may be able to claim the interest on the loan as a deduction.

Later when the partnership has profit, the partners can start taking out their capital contributions with no tax consequences, since there capital contributions to the partnership were made with already taxed money.