Loan to a legal entity from an individual: features, requirements and an example

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In the article, we will consider how to apply for a loan to a legal entity from an individual, the features of the procedure and the nuances. Any head of the enterprise is well aware that business requires constant development. This often requires third-party investment, as rapid growth through profits alone is usually not possible.

The most common option for raising additional finance is bank loans. However, it is not always easy to get a bank loan and get it, especially for young organizations. In such cases, legal entities need to borrow funds from other organizations and individuals.

Deal processing features

In the overwhelming majority of cases, in transactions related to obtaining a loan to a legal entity from an individual, the lender is the owner of the business or persons affiliated with it.

Most often such options for raising finance are usedyoung companies just starting out. The law does not prohibit the issuance of loans to companies by any person. They can be issued by the founders of the organization, employees, outsiders.

But practice shows that it is the owners of organizations that provide loans for business, using their own savings. Such a transaction must be executed on paper. Documentation in electronic form can only be drawn up using qualified electronic signatures by both parties.

It is worth noting that a simple receipt when applying for a loan to a legal entity from an individual will not be enough. It will not have the force of the contract, but will only confirm the fact of the transfer of funds. If it is necessary to go to court, the lender will not be able to prove anything.

A loan can be issued in cash and things, however, the latter option is used very rarely, as it is difficult to process a return and may entail consequences for a legal entity.

The maximum amount of a loan to a legal entity from an individual is not specified by law. But in some cases, the head of the organization has to obtain approval for the transaction from each owner. This is necessary only if such a provision is reflected in the charter of the organization.

Legislative regulation

The concept and conditions for granting a loan by an individual to a legal entity are reflected in the Civil Code of Russia. It also describes the main parameters, taking into account which shouldmake deals. In addition, the Civil Code of the Russian Federation made a reservation that when making such a transaction, an agreement should be concluded, and the use of a receipt is impossible.

The borrower and the lender must necessarily take into account the provisions of the Tax Code. It is not always possible to completely avoid paying taxes. In addition, each inspectorate takes a different position on this issue.

The main provisions of the agreement

When concluding a loan agreement with an individual, the parties should understand that it is the most important document regulating all their relations: issuance, servicing, repayment.

The following data must be reflected in the contract:

1. Details of each party to the agreement: name, full name, bank account details, passport details, addresses.
2. Acceptance by the borrower of obligations related to the repayment of the debt, the term of the loan, if it is not unlimited.
3. Goals. Goals are indicated if the funding is targeted.
4. Presence of interest, interest rate. If there is no interest, it should be reflected that the loan is interest-free.
5. Additional features and terms of the deal. For example, that the borrower undertakes to provide security for the contract.
6. Responsibility of the recipient of funds.

The more details of the transaction will be set out in a written agreement, the fewer questions will arise in the future for each of the parties. In the absence of a term for a loan to a legal entity from an individual, it is considered unlimited. In this case, you will have to return the debt within 30 days from the date ofrequesting a refund.

The contract also allows a direct indication of the termless nature of the agreement. In this case, it should be understood that the tax inspectorate is ambiguous about this. In the event of a long non-repayment of such a loan, additional income tax may be charged.

Loan from an individual to a legal entity: requirements

Most of the requirements always depend on the individual lender. It is up to him to decide who he is willing to lend money to, on what terms.

However, there are certain mandatory requirements if the borrower is a legal entity:

1. Organization must have state registration.
2. The activities of the organization at the time of execution of the contract should not be suspended.
3. Availability of permission to complete the transaction from all owners (if required by the charter).
4. The organization should not be subject to bankruptcy proceedings.

Some lenders set minimum terms of business, require profit and no loss. They have that right.

Sample contracts

A legal entity should approach the execution of a loan agreement for an individual with all responsibility. Its content will directly affect all the terms of the transaction. In addition, it may be required by the tax authorities. It can significantly affect the calculation of taxes, both for the lender and for the borrower.

Contracts are the mostvaried. They may provide for the payment of interest for the use of money or not, they may be secured by a guarantee, collateral or not, have a targeted or non-targeted character.

All these points should be taken into account in advance, when drawing up a written agreement, since it is not always possible to make changes later.

A sample loan agreement for an individual to a legal entity is presented below.

Contracts of interest-free type

For a long time, interest-free loans were the main method of obtaining finance from the founders to replenish working capital, business expenses of the company.

If there was a need, the founder received his own funds back, neither side incurred additional costs. But the tax authorities changed their minds, and some organizations were taxed additionally on the profits they supposedly received by saving on interest.

The courts, on the contrary, took the side of the borrower, recognizing such acts as invalid. Therefore, it is better to clarify such points in advance by contacting the service organization of the Federal Tax Service.

It is worth noting that the interest-free loan agreement must contain a direct indication that there is no interest on the loan. If such data is not specified, the recipient of funds should pay them monthly, based on the key rates of the Central Bank of the Russian Federation.

By issuing an interest-free loan, the lender does not receive a profit in the form of accrued interest. In addition, a transaction of this nature allows the debt to be repaid at any time, regardless of the date specified in the agreement.

Otherwise, an interest-free loan agreement may include the same terms and conditions, including information on pen alties, as other similar agreements.

Percentage type contracts

If the contract provides for the payment of a certain remuneration to the lender for the use of borrowed funds, it is called interest.

The rates are agreed upon by the parties during negotiations, may reflect the accrued interest for the day, month, year of use of money (the accrual period can be any).

In addition, it is allowed to designate a specific amount that the recipient of funds will have to pay to the lender for the entire term or part of it. Such contract options are used more often than others if the business raises money from private investors or employees.

The text of the contract must necessarily stipulate rates or specific amounts of remuneration, the procedure in accordance with which interest will be calculated and paid.

In the case when the loan agreement does not contain an indication of the interest rate, interest should be calculated based on the key rate of the Central Bank. In this case, the lender should pay them every month, regardless of the deadline for repaying the debt.

Target Loans

In the vast majority of cases, agreements do notthe purposes for which the loan is granted. But in some situations, for example, if the organization has many owners, the person lending wants to issue funds exclusively for a specific purpose and control the use of money. In such cases, a dedicated loan agreement should be entered into.

At the request of the lender, the organization will have to provide him with documentation confirming the expenditure of money for the purpose specified in the agreement. In case of violation of the condition on the targeted spending of money, the person who issued the loan has the right to demand the immediate return of the debt and interest that were actually accrued.

Secured agreements

In some cases, lenders want a guarantee that the funds will be returned, in particular when the loan is quite large. In such cases, the contract must be secured by a pledge or surety.

Collateral is more preferable for the lender, especially if the recipient of funds has liquid assets. The agreement must indicate that it is secured by the property of the recipient, and which one. In addition, a pledge agreement is required.

List of documents

Any transactions related to money must be secured by a paper or electronic agreement. An individual lender will only need to provide a passport.

The borrower will be required to provide:

1. A copy of the order, in accordance withto whom a leader has been assigned.
2. Copy of charter.
3. Copies of PSRN and TIN.
4. Power of attorney, if the agreement is not signed by the head.

In some cases, lenders require additional provision:

1. Pledge documents (if the contract is secured by a pledge).
2. The development strategy or business plan of the organization.
3. A balance sheet or a report that will reflect the profit and loss of the organization.

What else does a loan agreement between a legal entity and an individual imply?

Refund terms

The parties are given the right to independently set the terms for the return of money. There is also the possibility of concluding an open-ended contract.

When concluding the latter, the borrower is obliged to repay the loan no later than 30 days from the date of receipt of a written request from the lender to repay the debt.

In practice, agreements concluded for more than three years and confirming the issuance of a large amount arouse suspicion among the tax authorities. In such cases, the operation may be equated to gratuitous assistance, as a result of which additional income tax of the recipient of funds will be charged.

This situation can be avoided by renewing the contract after a certain period of time, or by providing for the possibility of its prolongation in the contract. What threatens a citizen who has issued a loan to a legal entity?

Risks of the parties

A citizen who issued a loan to a legal entity may face a non-return of funds. In the case when we are talking about an organization in which the director and founder are oneman, non-return can occur only because of the unprofitability of the business. The recipient will be the one to blame for this.

In other cases, this risk can be minimized by securing the agreement in the form of a surety or a pledge.

The borrower in this case risks losing the property that was pledged under the contract, or as a result of litigation. In this regard, the recipient of funds is recommended to carefully calculate the risks before entering into an agreement.

In addition, each party to the agreement has tax risks depending on the nature of the loan and other terms of the agreement.

Tax consequences of the loan agreement

If it is interest-bearing, then the person who issued the funds receives income in the form of interest. From this remuneration, an individual will have to pay 13% in the form of personal income tax.

In the case when the lender is an employee of the organization that received a loan from him, the accounting department of the company can pay the tax and provide the necessary documentation to the IFTS for him. Otherwise, the lender will have to do it themselves.

A borrower paying interest can, in turn, account for it as an expense, thereby reducing the tax base. In the absence of interest, the tax authorities take into account the savings resulting from non-payment of interest, and treat it as profit that can increase the tax base.

Thus, borrowing money from a legal entity (LLC) from an individual is a widespread phenomenonin the economic activity of organizations in Russia. Often, these loans are the only way to raise money for a business.