Personal Finance & Money Asked by BladePoint on May 12, 2021
Can you loan money to your own small business by billing yourself and making a payment to it with your personal credit card? How would the accounting work on that? The business isn’t actually billing you for a service, so the transaction shouldn’t be taxable, and it shouldn’t be treated as income either.
Edit: The small business is a single-member LLC incorporated in the USA.
This typically considered a form of credit card kiting. It is not allowed under the TOS of most (if not all) card processing/merchant account agreements. There can be legal consequences if intent to defraud can be proven, but typically it just results in account closure.
Answered by Hart CO on May 12, 2021
If you want to give your company a loan, then just give your company a loan. Write a piece of paper, where you clearly state that you personally (Mr. Bladepoint) will give a loan to the company (Perfect Blades LLC or Ltd.), write down when the loan should be repaid, what the interest is, and hand over the money in any way you like. Your credit card company may not be happy with you giving loans to random companies using your credit card.
Make sure that you transfer the money in a way that is properly recorded, or the tax office will suspect tax evasion when the loan is repaid. (They will see a paper claiming a loan but no evidence of it, so they will suspect that the repayment is not a repayment, but extracting profits from the business).
"Billing yourself" is not a good idea at all. A bill leads to income for the company, which is pure profit if the company doesn't have any cost, so taxes will have to be paid. And the company cannot repay the loan, they have to give you a dividend payment which is again taxed.
Just do it straightforward, as a loan.
Answered by gnasher729 on May 12, 2021
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