

How does one self-fund a startup properly? - coglethorpe

I have a startup (set up as an S-Corp) I want to add some of my personal funds to, but I want to know the best way to go about it.  If I pay myself with equity can I create additional shares, or do I have to transfer shares?   If I consider it a loan to the corporation, do I need to specify terms of repayment?<p>Any websites that go over this for the self-funder, or person seeking a family and friends round?
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skmurphy
Loan the money in, it's easier to get it back out (the corporation repays the
loan) and you can recognize a loss more easily. Setting a term, a reasonable
interest rate, and specifying that you will get a single balloon payment at
the end of the term is an easy way to go. Put this into the minutes of a board
meeting and get a signed document from all board members (if only yourself).
You should only put money in that you need for operations, any early salary to
yourself is better paid directly out of savings (value is recognized in the
"sweat equity" you have from the startup and avoids taxes on roundtrip into
and out of the Sub-S as wages/dividends). Happy to chat, my contact info is in
my profile; I am not a lawyer or a CPA (both of whom you should already have
if you are incorporated) but we've helped a number of early stage software
firms with formation strategy issues like these.

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ScottWhigham
No clue for an S corp but I'm saving this for later so I can read some smart
person's answer :)

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coglethorpe
Maybe I will need to repost this on Monday... So far no answers...

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epi0Bauqu
I have a number of self-funded startups, and it is a case by case decision on
what to do. IM me if you want to discuss.

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cd
www.alltop.com, there are few interesting and aggregation of various articles
which help startups.

