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JamesMillar, post: 28385 wrote:
Provided you don’t have many creditors and provided you think the business will generate decent revenues and profits from early stage then booking as debt is still a good option. It will allow the company to return your investment funds tax free – which is always good. You can also stream any interest on the loan to a more tax friendly entity / family member.

If you have only recently started your business / company and if you haven’t produced any external / financial reports (and if you haven’t provided draft reports to third parties which they have relied upon) then there is no reason that you can’t temporarily book it to one or the other pending a final decision at the end of the first financial year. Once the first year is done then its pretty much set in stone.

To be honest most of your early stage creditors are going to ask for personal guarantees for accounts anyway so directors liability under the Corporations Act is probably a mute point.

As you get larger then there will be more serious strategic / financial and tax issues associated with this.

Again I’m probably bringing a bigger end perspective to this – if you’re content with a smaller micro business (and there is nothing wrong with a profitable micro business) then these items are probably largely irrelevant. However without knowing anything about your operations I’d prefer to assume that your business could be quite large one day and therefore may encounter these issues. Its far better to consider it early on rather than have to unwind problems at a later stage.

Thanks James. The business has two arms, consulting and an online software product. Neither are expected to produce large amounts of creditors as most of the work is done myself. The purpose of the business will not be to grow huge but to become an automated source of revenue. Hence the loan option is still probably relevant as you say. Payback of the funds at some point would be nice, tax free as you say – I would probably make the loan interest free, if this is possible just to keep it simple. As you say I do have a good period of time to sort this out by getting the accountant to fix it up at ITR time, but I would like to be on top of it now and reduce the amount of work they have to do.