What is the correct way to self-fund the expenses of a one-man company?

After having registered a company with a certain share capital, how do I fund the company for the day-to-day operating expenses? Do I:

Transfer cash to the company's account and issue more shares to myself,

Transfer money to the company without issuing shares,

Use my personal credit card to pay for the company's expenses,

Write a loan to the company,

Use the share capital of the company?

Expenses Operations Self Funded Capital

asked Mar 22 '14 at 03:12

Wayne
6 points

I just want to clarify that it is a private company limited by shares. I am not talking about situation specific to the US. I can't make my situation specific to my country since that will be too localised as my country is too small. – Wayne 10 years ago

2 Answers

This is a question for your accountant and depends on the type of company - LLC, C-corp, or S-corp, and your goals for the company and yourself personally.

I believe you can just deposit money into business account and then show the money as a business loan to the company on the books, which the company can repay you when it's profitable. However, if you need to involve a 3rd party (partners, investors, buyers) at some point, the loan will be a liability and make company's financial shape less attractive.

answered Mar 23 '14 at 00:07

Webbie
2,835 points

Sorry, I don't have an accountant yet. It is a one-person startup. Operating expenses are small but not negligible. If I want to keep track of all company expenses, then can I say that your suggestion would be me giving the company a loan? Would it be ok for the company to draw down from its share capital in its own business account? I mean I can register the company with a share capital of $50,000 and then subsequently loan it another $50,000. Or I can register the company with a capital of $100,000 right at the start and it draw down from there. – Wayne 10 years ago
Find a good accountant to discuss this with, it will likely not cost you anything (they rarely charge for consultations) and any money you spend on an accountant are likely gonna be worth it. You need a professional advice, not rely on an opinion of other entrepreneurs. – Webbie 10 years ago

Several of those are different questions, not options for a single question. @Webbie is right that the answer to a lot of these will depend on your situation. You should definitely get an accountant as the small amount you pay him/her will pay off in taxes saved.

answered Mar 23 '14 at 01:02

Darlene Garrett
261 points

Do you mean to say that all options are possible? As stated, my situation is a startup, operated by one person, private company limited by shares. Getting an accountant right at the start is off the question. – Wayne 10 years ago
1

@Wayne - you will need an accountant come tax season, so if you find someone now they might wave any consultation fees in consideration of future business (very common). If you want things done right, don't save on accountant. Accountants don't charge nearly as much as lawyers and tend to save you money in the long run. Every year I kick myself for not talking to my accountant before tax season... – Webbie 10 years ago