Investors

[alpine692003]

Hey guys,


I was wondering, if you were to pay an investor every month lets say $200 a month, how would you label that on the cheque that you were to print on the bottom for your records and filing records?

Investor payment #1 of 300???? Investor bonus, investor pyament??

[mastercare]

If you have an investor, it depends on how you've set it up. Here are just some possible scenarios.

A guy loans you $10,000, you pay him $200 a month in interest. You eventually write him a check for his $10,000 and you're out of debt. This is similar to a company selling a bond. In this case the interst you're sending him should be "interest income paid."

If you're using the same scenario, and paying a combination of interest and principal to him each month, then you're paying him "loan re-payment of principal and interest." - (if this is a multi-year agreement, separtae your interest & Principal for your tax records)

Or, maybe this person is has given you $10,000 and is not loaning the money to you at all. Maybe he owns part of the biz, and you're paying him a $200 profit off of it. In that case you simply pay "Profit distribution to owner (shareholder)." - Make sure you send him a 1099 tax statement so that he pays the taxes on his portion of profits----- not you.

Or, in the above scenario, rather than splitting up profits....you simply send him a "dividend" check. The thing to keep in mind is that a dividend is technically a "refund of unused monies." So, he gives you a lump some of money, and you don't need that much, you are returning $200 a month to him of "unused monies." That is a mutually owned company works (Credit unions pay you dividends on your savings account....not interest since each customer is also a member, and owns a share of the business based on the balance in their account). Remember that if you use the term "dividend" you need to send him a 1099 div statement rather than a 1099-misc.

Hope one of these scenarios works for you....I guess it depends on what your agreement is.,

[alpine692003]

Thanks a lot for the information, it helped out a lot.

[YardPro]

great explination