Home – New Forums Money matters Injecting Cash into Company

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  • #976239
    Cjay
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    Hi,

    I’ve started a company and am wondering how I go about ‘giving’ money to the company. Do I simply deposit the funds, etc? I would think there would be a proper process to do this?

    The business structure is a Company, owned by a trust in turn ran by a corporate trustee.

    #1079923
    MyGreatIdea
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    If you enter “loan” and “company” in the search function you’ll find plenty of threads on this subject.

    This one might help. If not, browse the search results yourself to find your answer.

    Wendy :)

    #1080123
    MyGreatIdea
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    If you enter “loan” and “company” in the search function you’ll find plenty of threads on this subject.

    This one might help. If not, browse the search results yourself to find your answer.

    Wendy :)

    #1079924
    yourvirtualboard
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    Usually done via a Director’s Loan Account – if you put money in then the account is in credit.

    #1080124
    yourvirtualboard
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    Usually done via a Director’s Loan Account – if you put money in then the account is in credit.

    #1079925
    JacquiPryor
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    Hi Clay – if you are trying to figure out where/how to record the loan to the company in accounting software, please let us know what program you use?

    Myob for example – simply add “Director loan account” or similar name to your list of LIABILITY accounts… when you ‘receive money’ to your normal trading account (or whever the deposit is going) simply select the newly created liability account; likewise if/when company is repaying the loan, or part thereof – again just select the loan/liability account at the time the money is being ‘spent’ from the company as repayment – these will ensure your credits/debits are on the right side and will allow you to generate reports at any time of who owes who what etc.

    #1080125
    JacquiPryor
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    Hi Clay – if you are trying to figure out where/how to record the loan to the company in accounting software, please let us know what program you use?

    Myob for example – simply add “Director loan account” or similar name to your list of LIABILITY accounts… when you ‘receive money’ to your normal trading account (or whever the deposit is going) simply select the newly created liability account; likewise if/when company is repaying the loan, or part thereof – again just select the loan/liability account at the time the money is being ‘spent’ from the company as repayment – these will ensure your credits/debits are on the right side and will allow you to generate reports at any time of who owes who what etc.

    #1079926
    James Millar
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    You could book this one of two ways.

    Option 1 is a loan arrangment (simple credit loan) as referred to above. There is no requirement to charge interest. If the loan is “at call” then you need to keep on eye on the retained earnings / profitability / equity section of the balance sheet at all times. If you record this is a credit loan and have some losses there is a strong chance the company will have negative net assets on the balance sheet. Negative net assets can prima facie indicate insolvency and accordingly you can’t trade (Corps Act).

    Option 2 is to book it as equity / paid up capital / share subscription. This is a one way contribution and cannot easily be redrawn. The upside is that you are far less likely to have the negative net asset position so technical insolvency is less likely to occur.

    The most common would be option 1 thoughout the year and let your accountant address compliant treatment (provided they can).

    Helping build better businesses and better lives with expert financial and taxation advice. info@360partners.com.au www.360partners.com.au 03 9005 4900
    #1080126
    James Millar
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    You could book this one of two ways.

    Option 1 is a loan arrangment (simple credit loan) as referred to above. There is no requirement to charge interest. If the loan is “at call” then you need to keep on eye on the retained earnings / profitability / equity section of the balance sheet at all times. If you record this is a credit loan and have some losses there is a strong chance the company will have negative net assets on the balance sheet. Negative net assets can prima facie indicate insolvency and accordingly you can’t trade (Corps Act).

    Option 2 is to book it as equity / paid up capital / share subscription. This is a one way contribution and cannot easily be redrawn. The upside is that you are far less likely to have the negative net asset position so technical insolvency is less likely to occur.

    The most common would be option 1 thoughout the year and let your accountant address compliant treatment (provided they can).

    Helping build better businesses and better lives with expert financial and taxation advice. info@360partners.com.au www.360partners.com.au 03 9005 4900
    #1079927
    Cjay
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    Thanks for all the info guys!

    The dollar amount is ‘small’, only around 3-4k or thereabouts to pay for compliance, electronics etc. After that point there shouldn’t be an further requirements for cash injection. Would this be an issue of insolvency in this case if I gave the company an interest free loan which would be paid off within a number of months?

    #1080127
    Cjay
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    Thanks for all the info guys!

    The dollar amount is ‘small’, only around 3-4k or thereabouts to pay for compliance, electronics etc. After that point there shouldn’t be an further requirements for cash injection. Would this be an issue of insolvency in this case if I gave the company an interest free loan which would be paid off within a number of months?

    #1079928
    James Millar
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    It should be fine.

    Helping build better businesses and better lives with expert financial and taxation advice. info@360partners.com.au www.360partners.com.au 03 9005 4900
    #1080128
    James Millar
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    It should be fine.

    Helping build better businesses and better lives with expert financial and taxation advice. info@360partners.com.au www.360partners.com.au 03 9005 4900
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