Insider Loan
Insider Loan
- In the context of a private corporation, an Insider Loan is a
loan made by a corporation by one of its shareholders,
officers or directors or
to a corporation by one of them. Shareholder loans are especially scrutinized by
the IRS to make certain that they were approved by the Board of Directors and
documented in executed loan documents. Absent proper authorization in the
corporate minutes (and written loan agreements), the IRS can reclassify insider
loan funds from a shareholder to a corporation as additional capital
contribution and the loan principal repaid to the shareholder as a dividend. The
payment of this "dividend" to you is not deductible by your
corporation and is delinquent taxable income to you on which you may owe back
taxes, interest and
penalties.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
Disclaimer: The foregoing is intended to provide general information and may not be suitable in specific instances. The glossary information is not intended to be exhaustive, but rather to illustrate typical considerations. The material is provided with the understanding that it is not legal, accounting, tax or any other professional advice.
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