Hi, I am sure that this has come up before but couldn't find the exact answer I was looking for, so here goes.
My business partner and I are buying a flip (in our LLC's name) and I am providing the funds for the down payment. When the flip is completed, we will pay back the lender as well as myself. Is there anything specific that I need to consider to make sure I am not going to run into any tax issues when the business pays me back?
@Maximilian Glodde Repaying a loan does not create a tax issue. However, interest-free loans between related parties might. Create a promissory note to document the transaction and specify the interest rate. If you want a low interest rate, then use the most recent IRS Applicable Federal Rate (AFR) for the loan. Repayment of the loan in accordance with the terms of the promissory note will avoid most tax issues.
Thanks @Bob Norton ! This is very helpful. Will a simple document signed by all members of the LLC suffice?
I am listing out date, amount, interest rate and repayment term.
@Maximilian Glodde Yes, that is the basic information that you need, and you can probably download a simple form for a promissory note from the internet.