Can LLC legally lend money to a friend?
"One thing I would add to TTT's answer: One of the benefits of using an LLC for your business is right there in the name - ""limited liability"". It provides a level of protection for your personal assets should your business go bankrupt, get sued, and so forth. However, if someone can show that there's no real separation between your LLC's activities and your personal activities, then they can ""pierce the corporate veil"" and go after your personal assets. If this loan is really purely personal and not related to your business activities, you may create a paper trail that can later be used in this way. My advice would be to just avoid the whole thing and make the loan from personal funds. I don't see any upside to doing this out of the LLC funds." Legally, I can't find any reason that the LLC could not lend money to an individual. However, I believe the simplest course of action is to first distribute money from your company to your personal account, and then make it a personal loan. Whether the loan is done through the business or personally, financially I don't think there is much difference as to which bucket the interest income goes into, since your business and personal income will all get lumped together anyway with a single person LLC. Even if your friend defaults on the loan, either the business or you personally will have the same burden of proof to meet that the loan was not a gift to begin with, and if that burden is met, the deduction can be taken from either side. If a debt goes bad the debtor may be required to report the debt as income. I can't say if there is anything specific that makes lending illegal, but if your company goes bankrupt, you might end up in trouble.  First, it's a loan. It must be repaid. It must be in the books as a loan, and if your company couldn't pay its bills, you would have to ask for the money back. If the company goes bankrupt, your creditors will ask for the loan to be repaid.  Now if things are worse, your company goes bankrupt, and the person cannot pay back the money, then you could get into real trouble. Creditors won't like that situation at all. They will claim that you moved that money aside to protect it from creditors. They might be able to force you personally to pay, or even start criminal charges against you if you can't pay either.  In the UK (and probably elsewhere) it's criminal for the company to pay dividends if that means it cannot fulfil its financial obligations. If there is no money left because of that loan, then you can't get dividend payments from your company.  So as long as your company's finances are fine, and that person's finances are fine, you will be Ok (except I don't know if you would need a license), but if there are financial problems then being an LLC might not protect you. "The answer to your question is...it depends.  Depending on the state you, your friend, and the LLC are located in, it can be very easy to run afoul of state banking laws, or to somehow violate some other statute pertaining to the legal activities an LLC may undertake by doing something like a loan. It is not unusual (or illegal) for officers or employees of a business entity to be loaned money by the company they work for, so something of this nature wouldn't be an issue with regulatory agencies.  Having your LLC loan money to a friend who isn't an employee or officer of your LLC just might not be kosher though. The best advice I can give is that you should call the state banking commission or similar agency in your state and ask them whether what you want to do is alright.  The LAST thing you want is to end up with auditors or regulators sniffing around your business, even if you haven't done anything wrong, and you certainly don't want to run the risk of accidentally ""piercing the corporate veil"", as someone else here astutely pointed out. Good luck!" Tax accountant here.  The money is yours and you can do what ever you want with it. Just make sure to put it on the books as Loan Receivable and have an Interest Income account.
"The point here is actually about banks, or is in reference to banks. They expect you know how a savings account at a bank works, but not mutual funds, and so are trying to dispel an erroneous notion that you might have -- that the CBIC will insure your investment in the fund.  Banks work by taking in deposits and lending that money out via mortgages. The mortgages can last up to 30 years, but the deposits are ""on demand"". Which means you can pull your money out at any time.  See the problem? They're maintaining a fiction that that money is there, safe and sound in the bank vault, ready to be returned whenever you want it, when in fact it's been loaned out. And can't be called back quickly, either. They know only a little bit of that money will be ""demanded"" by depositors at any given time, so they keep a percentage called a ""reserve"" to satisfy that, er, demand.  The rest, again, is loaned out. Gone.  And usually that works out just fine. Except sometimes it doesn't, when people get scared they might not get their money back, and they all go to the bank at the same time to demand their on-demand deposits back. This is called a ""run on the bank"", and when that happens, the bank ""fails"". 'Cause it ain't got the money.  What's failing, in fact, is the fiction that your money is there whenever you want it. And that's really bad, because when that happens to you at your bank, your friends the customers of other banks start worrying about their money, and run on their banks, which fail, which cause more people to worry and try to get their cash out, lather, rinse repeat, until the whole economy crashes. See -- The Great Depression.  So, various governments introduced ""Deposit Insurance"", where the government will step in with the cash, so when you panic and pull all your money out of the bank, you can go home happy, cash in hand, and don't freak all your friends out. Therefore, the fear that your money might not really be there is assuaged, and it doesn't spread like a mental contagion. Everyone can comfortably go back to believing the fiction, and the economy goes back to merrily chugging along.  Meanwhile, with mutual funds & ETFs, everyone understands the money you put in them is invested and not sitting in a gigantic vault, and so there's no need for government insurance to maintain the fiction.  And that's the point they're trying to make.  Poorly, I might add, where their wording is concerned." Can I work on 1099 from my own company instead of on W2? The reason is   on W2 I can't deduct my commute, Health Insurance and some other   expenses while on 1099 I think I can able do that. Since I am going to   client place to work not at my own office, I am not sure whether I   should able to do that or not. If you have LLC, unless you elected to tax it as a corporation, you need neither 1099 nor W2. For tax purposes the LLC is disregarded. So it is, from tax perspective, a sole proprietorship (or partnership, if multiple members). Being a W2 employee of your own LLC is a bad idea. For all these above expenses, which can I use company's debit/credit   card or I need to use only my personal debit/credit card? It would be better to always use a business account for business purposes. Doesn't matter much for tax per se, but will make your life easier in case of an audit or a legal dispute (limited liability protection may depend on it). If I work on 1099, I guess I need to file some reasonable taxes on   quarterly basis instead of filing at year end. If so, how do I pay my   tax on quarterly basis to IRS? I mean which forms should I file and   how to pay tax? Unless you're a W2 employee, you need to do quarterly estimate payments using form 1040-ES. If you are a W2 employee (even for a different job, and even if it is not you, but your spouse with whom you're filing jointly) - you can adjust your/spouse's withholding using form W4 to cover the additional tax liability. This is, IMHO, a better way than paying estimates. There are numerous questions on this, search the site or ask another one for details. "You're confusing so many things at once here...... First thing first: we cannot suggest you what to do business-wise since we have no idea about your business. How on Earth can anyone know if you should sell the software to someone or try to distribute to customers yourself? How would we know if you should hire employees or not? If you say you don't need employees - why would you consider hiring them? If you say you want to sell several copies and have your own customers - why would you ask if you should sell your code to someone else? Doesn't make sense. Now to some more specific issues: I heard sole proprietary companies doesn't earn more than 250k and   it's better to switch to corporation or LLC etc. because of benefits. I heard it was snowing today in Honolulu. So you heard things. It doesn't make them true, or relevant to you. There's no earning limit above which you should incorporate. You can be sole proprietor and make millions, and you can incorporate for a $10K/year revenue business. Sole proprietorship, incorporation (can be C-Corp or S-Corp), or LLC - these are four different types of legal entity to conduct business. Each has its own set of benefits and drawbacks, and you must understand which one suits you in your particular situation. For that you should talk to a lawyer who could help you understand what liability protection you might need, and to a tax adviser (EA/CPA licensed in your state) who can help you understand the tax-related costs and benefits of each choice. On the other hand I heard that if I create LLC company, in case of   failure, they can get EVERYTHING from me, what's this all about? No. This is not true. Who are ""they"", how do you define ""failure"", and why would they get anything from you at all? Even without knowing all that, your understanding is wrong, because the ""LL"" in LLC stands for LIMITED liability. The whole point of forming LLC or Corporation is to limit your own personal liability. But mere incorporation or forming LLC doesn't necessarily mean your liability is limited. Your State law defines what you must do for that limited liability protection, and that includes proper ways to run your business. Again - talk to your lawyer and your tax adviser about what it means to you. I'm totally unfamiliar with everything related to   taxes/companies/LLC/corporation etc Familiarize yourself. No-one is going to do it for you. Start reading, ask specific questions on specific issues, and get a proper legal and tax advice from licensed professionals." "Because the value of distressed assets is close to what they are selling for.   When you lend money, you know there is a risk of default.  You gamble on that risk, and you take the responsibility if you lose because the person taking the money can't pay.  People who buy distressed debt on the idea that they can make more money off of it are only able to do that in two ways:  not giving a shit what the impacts of wringing more money out create, figuring out a legal way to make someone else pay for it through ripple blackmail effects (other people also are impacted when a country can't function.)  If you back Klarman, you may say the point is you are ""teaching"" Puerto Rico and everyone else that they shouldn't take on debt they can't afford.   But when has that ever worked?  The pensioners who are bankrupt are the ones actually getting the pain of the lesson.  Another lesson could be to investors not to lend to people who can't pay them back.  The people lending the money are the ones who now don't have it because they made a bad choice.    Seth Klarman could also learn a lesson about taking on distressed debt being a non-lucrative pastime.  Or we can all learn a lesson that taking on distressed debt is very lucrative.  A big change America implemented was getting rid of debtor's prisons.  This looks a lot like getting excited about debtor's prison to me.  EDIT:  I should note I am thinking of the Algerian version of making a ton of money off of distressed national debt.  As opposed to making a bit more money off of distressed debt because you were willing to let the collapse figure itself out.  Though I'm not so sure about that either." "I don't think it would be counted as income, and if it's a short-term loan it doesn't really matter as the notional interest on the loan would be negligible. But you can avoid any possible complications by just having two accounts in the name of the person trying to get the account benefits, particularly if you're willing to just provide the ""seed"" money to get the loop started." "Reading wiki, are llc's publicly owned? I couldn't seem to find any info on liability protection either. I know that one of my friends purchased a small business that was pre-set up with llc. He didn't know much about it though other than it made things ""easier""." "Money relationships are the opposite of friend relationships. That's why there's so much danger in loaning money to a friend - if the transaction doesn't work out well for one of you, it can destroy the friendship. Many of the answers here suggest you be prepared for the possibility that your friend will not pay you back. This is called a ""gift"". Give your friend the money, and trust that they will feel grateful. That gratitude will create generosity, and they will in turn seek to give gifts to you and to others in your circle. If you're not ready to give money to your friend, then you're better off not doing it. If you are ready to give money to your friend, then do it without expectation of return." Technically it's an asset - a note you hold and your friend promised to repay you.