How To Denote Debts You Owe Friends And Relative Whilst Incorporating

How should I denote debts I owe friends or relatives while incorporating?

What you should do is you should always have some sort of evidence of payment. If someone, for instance, loaned you or your business ten or twenty thousand dollars, or even if it was twenty dollars, the best way to document that is through a promissory note, and there are some really easy places where you can get them; you can find them online, you can find books that tell you how to write them out, and keeping accurate records like that will always, always benefit your company. The one thing you do need to be careful about when you take or accept a loan from anyone is that you don't want it to look like a gift, and the way you do that is you have to make sure that you pay them some sort of interest. For instance, if a prevailing interest rate was five percent and your parents gave you a hundred thousand dollars to start a business with zero interest, well really every year five thousand dollars would be a gift to you because that's how much interest you would have had to pay and even compounded over the years. So you want to make sure your promissory note bears some sort of rational interst that you can relate to the market, and typically what I tell people is take a look at what a savings account is giving and give someone an extra point on it, if they're a friend. If someone's a real meany you might have to give them the maximum allowed by law.