Loan money to your own company


#1

If you own a corporation that’s profitable, and you have cash, why not loan it to your own company (rather than putting in a bank), and have the company pay you interest on the loan? You need a written demand note between yourself and the company, but this is a way to pull money out of a closely-held corporation without having to pay FICA and payroll taxes. The interest you receive will be taxed as ordinary income, but you’ll come out ahead by paying yourself a higher interest rate than what your cash would earn at bank, and not having to pay what, for you, would be equivalent to SE taxes. If you leave profits in the corporation, you’ll suffer double taxation in the long run, so it’s usually in your best interest to pull the money out and pay taxes on it. You can pay yourself whatever it would cost the corporation if it had to borrow the money from a bank, and in many areas of the country short term bank loans now cost 5% or more. Get your CPA to review this if it’s a possibility for you.