Jennifer Adams outlines the tax implications associated with various sources of funding for a business.
The tax implications of any source of business finance depend upon the nature of the financing and the purpose of the funds.
Each source carries distinct tax consequences that can impact a business's profitability, tax liability, and financial structure.
Personal financing
When an unincorporated business is financed using the business owner’s personal funds, there are no immediate tax implications.
However, if the business is a corporation, any personal funds used will be treated as a loan and credited to their director's Loan account, for repayment when finances allow. In this case, there are no immediate tax implications, and tax-deductible interest can generally be paid on the loan.
