We would note that there is much more to structuring a business loan from your entity to you than what we cover here. That said, here are some tips for doing this. First, have a signed loan agreement that supports how the loan, payments and interest will work. The document should be signed by you and your entity. This means you may have to sign the agreement twice – once for yourself and again for your entity. Second, record the loan in your entity’s minutes. Your entity should approve the loan and the loan terms in its minutes. In doing so, the entity should consider the pros and cons of the loan and document why the loan makes business sense. Third, record the loan on your entity’s balance sheet. If your entity has a loan agreement that indicates $50,000 was loaned to the owner, that $50,000 should be reflected on the entity’s balance sheet. The loan amount on the balance sheet should be adjusted any time a payment is made that includes principal. Fourth, make payments timely. Keep records of all payments made and note the portion that is principal and the portion that is interest. If there comes a point in time when it is not possible to make payments timely, then amend your loan agreement so payments can be made timely. Fifth, charge a reasonable interest rate. All of the above items don’t mean much if the interest rate charged is not reasonable. Whether it’s the owner or the entity making the loan, each party should document their research and findings as to why the interest rate being charged is reasonable. For more information and more help with this, schedule a call with TFW Advisors® today!