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Subject:  Re: How can my company make a loan to me? Date:  3/10/1999  10:59 AM
Author:  UUinMN Number:  11836 of 123001

Hi, Matt.

This is not professional opinion, so take with a grain of salt. OTOH, I am also a consultant, and own a C-corp, of which I'm the only employee. (I chose C on purpose, for other reasons, so I don't have direct experience with S-corp distributions.)

Yes, you can loan money back and forth between yourself and your corporation. I've done this--mostly from me to the corporation, when it was new. I didn't bother with loan documents (why sign a page as both creditor and borrower?), but I did mark the checks, and set up a separate account in QuickBooks to track it. And I did pay the loans off. I think this is a sufficient paper trail to make it clear that they were loans.

However, this probably won't help you with your situation. Your corporation would have to report Loan to Owner of $3400 as an asset, and would show a profit. And owe taxes.

Aside from that, you have to be somewhat careful about S-corp distributions. Since the corporation generated income by employing you as a consultant, it has to pay you a "reasonable" salary. What's reasonable?