Reply to: Me loaning money to LTD CO

[Scruff]

What did NLUK's accountant say? 😎

[Lance]

Are you really sure about that request???

That's lacking in useful content even for you. I'm disappointed.

3/10 Must try harder.

[Lance]

Hi Lance, could you give me a bit more info please.

Thanks

holy thread resurrection batman.......

You put £50k cash into the company as capital rather than a loan. That's an investment not a loan. Your shareholding becomes greater and the company doesn't have any debts.

Whether you do this, rather than a loan, is dependant on your exit strategy. If you intend to close the company with a lot of cash in the bank, to get entrepreneur's relief, then that £50k will be offset against the CGT you'd pay. If that's not your intention then there's little to be gained by this method over a loan.

IANAA

[northernladuk]

Hi Lance, could you give me a bit more info please.

Thanks

Are you really sure about that request???

[richy]

You could call the £50k capital as well. Although that has different tax distinctions when taking it back out.

Hi Lance, could you give me a bit more info please.

Thanks

[Lance]

You could call the £50k capital as well. Although that has different tax distinctions when taking it back out.

[richy]

See above re: Nitpicking.

The thread was about buying stuff for the company, not putting money in the company account for the hell of it. Buying stuff creates a trading loss, assuming as I did at first that he was paying for services or expenses to the tune of £50K as that was the number mentioned. And I corrected that to say not if they're counted as assets. Phew.

Thank you for all replies guys. I understand better now. The purchases are services.

[VectraMan]

If nothing bought:-

asset. Cash at bank 50k.
Liability. Dca 50k.

Shareholders funds 0.

Your implication was that taking a loan magically creates a trading loss. It doesn't.

Obviously i take the point that the funds could be used to buy assets.

See above re: Nitpicking.

The thread was about buying stuff for the company, not putting money in the company account for the hell of it. Buying stuff creates a trading loss, assuming as I did at first that he was paying for services or expenses to the tune of £50K as that was the number mentioned. And I corrected that to say not if they're counted as assets. Phew.

[ASB]

If nothing bought:-

asset. Cash at bank 50k.
Liability. Dca 50k.

Shareholders funds 0.

Your implication was that taking a loan magically creates a trading loss. It doesn't.

Obviously i take the point that the funds could be used to buy assets.

[Chart Accountancy]

Hello

I'm buying things on my personal debit card for the biz this year, but LTD CO won't be profitable for sales until next year. How best to structure this on LTD CO accounts?


I was thinking just a list of what is owed, yet to be reimbursed.

Alternatively, I could write up 50,000 loan letter. Pay the money into LTD CO. Then reimburse the money back out for purchases made on personal debit card.

Any helpful tips appreciated!


Cheers, rich

Hi Rich

You can either transfer funds to your company and make payments from the business bank account or pay from your personal account and claim out of pocket expenses. It will all be recorded at the end through your director's loan account as a credit in your accounts I.e Monies owed to the director. This will not be an issue and it happens very often in the first years of trading when the company is not yet profitable directors can pay for business expenses personally. It is just important to keep a good bookkeeping to record all business transactions appropriately.

[ASB]

Vm you are confusing capital accounts. The co will be "in the red" in p and l terms by what was actually spent. The 50k is simply a creditor.

[VectraMan]

It's perfectly normal for directors to fund new companies this way. Just add the things you buy to the director's Loan Account and then you can pay it back when you can.

The accounts will show the company being 50,000* in the red. But you'll be able to carry forward that loss to reduce a future CT bill. It'll all work out in the end. Assuming you make any money that is.


*Edit: Thought I'd better clarify before someone else nitpicks. If the things you're buying are assets, that is non-trivial things with resale value, then those are also listed in the accounts. So you could buy a £50,000 machine with your own money, and the balance sheet would show the company as worth £0 (£50,000 assets, £50,000 debts). The asset would then be depreciated over 4 years. Phew. In most cases a company worth £0 after it's first year is doing well.

[richy]

https://www.accountsandlegal.co.uk/s...o-your-company

Thank you for the link.

The page doesn't mention if I need to physically transfer the 50,000 to LTD CO as cash. So it sounds like I can just record the debt as a loan on that Director's Loan Account Statement that my accountant will use.

Does the Director's Loan show up on annual accounts? Would it look bad if shows 50,000 !?

[northernladuk]

https://www.accountsandlegal.co.uk/s...o-your-company

[northernladuk]

https://www.cobiaaccounting.co.uk/si...irectors-Loans