Discussion:SP Bank Loan now assumed by S-Corp - S/H Loan?
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Discussion Forum Index --> Accounting Questions --> SP Bank Loan now assumed by S-Corp - S/H Loan?
| 29 July 2009 | |
SP initially took out $10k signed by him. Now SP is changing to S-corp and want's 10k to be assumed by S-corp since a promissory note will be issued. What is correct recording on S-Corp Books?
Dr. S/H - Contributions Cr. Loan from S/H Future payments from S-Corp paying down bank loans will be recorded as: Dr Loan from S/H Dr Interest Expense Cr Cash Is this correct..... | |
| 31 July 2009 | |
| SP? If SP is the stockholder I guess debit stockholder loan and credit bank loan. Payments include debits to loan account and interest expense.
Or if SP is Special Purpose Entity changing to S corporation, there would be no entries. | |
| 31 July 2009 | |
| SP - Sole Proprietor which is now a shareholder in the newly formed S-Corp. | |
| 1 August 2009 | |
| Will determine and follow up. Some of my assoicates claim this cannot be done, since T/P persoanlly guaranteed the bank loan and S-Corp making payments would constitue a distributions which as JR1 and Kevinh5 I assume are referring to since this being a taxable distribution if not having sufficient basis Yes? | |
| 3 August 2009 | |
| Maybe I'm just a little slow today but I don't get the initial entry. Why are you putting the loan on the books? Why are you debiting S/H Contributions? Wouldn't a "S/H Contribution" be a credit of some sort to the Equity section? What asset accompanies the loan? | |
| 6 August 2009 | |
| I believe 99%+ of loans to my client's S corporations have been guaranteed by the stockholders. It normally should not be a problem to add an S corporation as a borrower; and if collateral is included, normally no a problem to change the borrower to the S corporation.
But perhaps banks/finance companies are not following normal procedures nowadays. | |
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