Family Loan / SM LLC Question (impact on business credit)

[Anonymous]

Hi All!

Brand new to myFICO and am hoping that someone out in the forum community may be able to provide a bit of guidance on an interesting topic for me.  As a bit of background, I'm a resident of New York state, have an Ohio registered single-member LLC, and have a bit of idle cash on my balance sheet as well as in my personal bank account.  

My brother currently has a decent balance (~$10K) on one of his credit cards that is charging 16% interest, so I figured I would help him out and provide him with a loan to payoff the debt and refinance with a loan from me at a much lower rate (within IRS limits, of course!).  

My question becomes, which of the following options makes more sense from a tax standpoint?:

• Provide him with the loan via cash on my LLC's balance sheet, i.e. a loan receivable on my balance sheet with loan documents coming on behalf of my company and record the interest income each tax year on From 1040 Schedule C; or
• Provide him with a personal loan via my own personal bank account, i.e. a loan receivable directly to me (not my LLC) and loan documents that require monthly payments to me (again, not my LLC) over a pre-determined loan term / amortization schedule, and keep track of interest income as it comes in for each tax year

I totally hold harmless anyone that provides "insight" and know that I should consult with legal / accounting experts to get a binding answer, but can anyone throw me a bone with their thoughts / views on what would be most intelligent from a tax perspective?  Trying to be as tax efficient as possible with this loan.  Also, would having a loan receivable on my balance sheet help or hurt in my application for my first LLC business credit card?

Thank you!

Best,

Dave

[redneck18]

Hey GEP, as for the tax question, I'm really not sure. But as applying for a business credit card, unless you are searching for a very large credit line, I doubt they request to look at your books. Therefore it would make no difference if you have that loan on your balance sheet or not to the credit application. I hope you get answers to your other question, I have posted several questions that just never seem to get answered.

[Anonymous]

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@redneck18 wrote:
Hey GEP, as for the tax question, I'm really not sure. But as applying for a business credit card, unless you are searching for a very large credit line, I doubt they request to look at your books. Therefore it would make no difference if you have that loan on your balance sheet or not to the credit application. I hope you get answers to your other question, I have posted several questions that just never seem to get answered.

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Thank you very much for responding, I appreciate it!

[Creditaddict]

1. if he has credit card with over $10k, does he not have good enough credit to get more new credit with 0% offers?

2. if you have a business and want to take out a credit card for him not to many allow Balance transfers these days (chase maybe) becuase it's a way to hide debt from personal credit onto business without showing anywhere really so banks make it harder to turn business credit into cash.

3. if you have great credit and don't mind a credit card with a balance under your name, sure there are tons of options with 18-21 months 0% discover and citi come to mind for longest, but chase slate is no fee and 15 months.

not sure why any of the options need to be taxed or reported on any balance sheet.