Recharacterized* The Internal Revenue Service regularly scrutinizes loan transactions involving shareholders and other corporate insiders. This is especially so with small, closely held companies. Like yours. Why play loose with these transactions? The IRS checks carefully to see if loans are actually shams intended to create favorable tax situations for shareholders without having any actual […]

Part 3: Loan Docs* Small, closely held corporations many times prefer to borrow money from their shareholders instead of from a bank. The shareholders may also be actively involved in managing or directing the business, and are usually willing to loan money to the corporation when it needs operating funds, or to make a major […]

Full Disclosure* Following the rules that pertain to “insider” loans (i.e. loans to officers, directors or shareholders with a financial interest in the loan) can help avert a future challenge by another shareholder, a creditor, or other party that might claim an interested insider should be personally liable for any advantage or financial gain they […]

Conflicts of Interest* It is not unusual for corporate shareholders or directors to have a personal interest in business decisions that affect the company they own or manage. For example, directors usually vote on setting their own compensation and that of the officers, which, in many small and closely held corporations, include themselves. This is […]