topic Due to/from affiliates in Get your taxes done using TurboTax

Due to/from affiliates

reisacctandtax — Tue, 08 Jan 2019 17:23:12 GMT

How are intercompany loans (without interest) or due to/from accounts treated on tax returns? Example:

Two partners own a company. One partner invests a large lump some into a business and gets repaid over time at random amounts. The capital accounts are 50/50 so the they would like to treat the lump sum as loan to not affect shareholder percentages.

Re: Due to/from affiliates

Carl — Wed, 09 Jan 2019 00:01:31 GMT

What kind of company? It matters. Parntership? Multi-member LLC? S-Corp? C-Corp? Joint Venture? Something else?
Overall, it is apparent that you do not know the intricacies' of a business owned by more than one person. There's no such thing as a "loan" from an owner. It's a capital investment. I would' HIGHLY recommend you seek professional help ASAP, especially if 2018 was your first year of business as a multi-owner company. Do note that the company tax return is due March 15th, and the late filing penalties are expensive, at $200 per owner per month. Fines and penalties for reporting things incorrectly can add up fast, and wil make the cost of professional help seem like a pittance in comparison.

Please seek professional help. Otherwise, you risk falling in with the 85% of new businesses that fail due to bankruptcy because they didn't do the taxes right that first year.

Re: Due to/from affiliates

reisacctandtax — Wed, 09 Jan 2019 16:12:45 GMT

Carl, that is false. Owners can contribute money to a company (partnership in this case) and treat it as a loan. It is then put on the schedule L of the 1065 on lines 7 or 19 depending on if its to or from the partner.

My question is, how does the IRS treat these loans. Must there be interest and repayment terms drafted or can one simply pay as profits allow?