Tax on private money

11 Replies

If I raise private money from a co worker or family, Do I need to w9 them? Does any thing need to be done for taxes? My company is in a llc.

Originally posted by @Jason Dillard :

@Bryan Richardson you should send 1099ints to your lenders if you paid interest.

 Thank you. This is my first time trying to raise private money. 

@Bryan Richardson

It really depends on what the relationship is between you and the friends/family/co-workers. 

Are you providing interest on the capital they provide?
Are they getting a profit/loss percentage of the profits of the deal you are in?

Originally posted by @Basit Siddiqi :

@Bryan Richardson

It really depends on what the relationship is between you and the friends/family/co-workers. 

Are you providing interest on the capital they provide?
Are they getting a profit/loss percentage of the profits of the deal you are in?

 I'm in the process of researching this now - what's the answer/scenario if the friends/family receives interest on the capital they provide?

@Zachary Bohn Thanks for the response!

@Sam Shueh >$600 in interest only? or if the the total amount + interest is >$600?

What recommendations do you have from a legal standpoint - promissory note vs notary, etc? 

If you're reporting interest of $600 or more that was paid to you in the course of your trade or business for a loan secured by a property, it's mortgage interest and should be reported on a 1098 form.  (The $600 amount is just interest, not principal.)  There are exceptions to the reporting requirement though. 

For full details and explanation of the requirements you should refer to this IRS publication: https://www.irs.gov/pub/irs-pdf/i1098.pdf

Originally posted by @Nathanael Rojas:

@Sam Shueh >$600 in interest only? or if the the total amount + interest is >$600?

$600 of interest only.