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The Judge
The Judge, Business Law Attorney
Category: Business Law
Satisfied Customers: 703
Experience:  Active business lawyer, business owner, & former judge. Over 30 years experience in business law.
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I have a client that used his personal funds to pay for ...

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I have a client that used his personal funds to pay for business start up costs to the extent of $130,000.00 he then incorporated a few weeks later. So the business bank account never had the $130,000.00 flow through it. How do I treat these start up costs ( officer loans)? Kindly respond>
The business bank account doesn't have anything to do with it. There are a lot of ways to contribute assets to a business in exchange for stock other than depositing cash into the business bank account. In this case, the key is how the transaction is documented.

Second, whether you treat the transaction as a shareholder loan, (not an officer loan) is very important to the strategy of how you want to take money out of the corporation in a tax advantaged method. But it doesn't have anything to do with the legality of the $130,000 problem you described.

And remember that corporate start up costs are amortized over a number of years, they are not expensed in the year of formation. So be very careful what you are calling start up costs. It has serious tax ramifications.

Thanks,

Steve
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