Legal firm recommendation - loan agreement Legal firm recommendation - loan agreement
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  1. #1

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    Default Legal firm recommendation - loan agreement

    Hi guys

    I have my established limited company as a contractor and I've created a new totally separate limited company for a side hustle

    I would like to loan my new company some money from my existing company, for which I'll need a loan agreement. Can anybody recommend a company or website where I can get advice and an agreement drawn up? I have searched on Google but difficult to assess the options, so looking for a decent referral.

    Thanks!

  2. #2

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    My accountant would my first step. They should know how these work and what you need. As it's between you and you the legals don't have to be as water tight as it would between two parties who are protecting their interests.
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    Quote Originally Posted by northernladuk View Post
    My accountant would my first step. They should know how these work and what you need. As it's between you and you the legals don't have to be as water tight as it would between two parties who are protecting their interests.
    Ok thanks for the quick response. I did initially try my accountants and they suggested getting a proper legal agreement written. Perhaps I'll go back to them and double check.

  4. #4

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    The one generated here looks reasonable.
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    I was thinking about doing this and was advised that you can only loan clear profits. Is that what you had in mind ?

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    Quote Originally Posted by tkmk View Post
    Ok thanks for the quick response. I did initially try my accountants and they suggested getting a proper legal agreement written. Perhaps I'll go back to them and double check.
    Hmmm...it can be a slightly tricky one for accountants to advise on. We're not lawyers, so not savvy enough to give proper advice on this kind of thing. Also if we say "you'll be fine, just wing it with some DIY agreement" and it all ends up going horribly wrong, you might try to hold us liable. Therefore the "safe" option is just to recommend getting formal legal advice, even if 99% of the time that might be complete overkill.

    My personal thoughts:
    - if you can, do it all personally, rather than direct company to company. I appreciate some people won't want this as can be tax consequences of them either taking more dividends or long term borrowing from the first company.
    - if you do do it company to company, ensure you keep the number of transactions as low as possible. Ie do not just get company A to regularly pay company B's bills, as unless your admin skills are brilliant, you'll get in a right mess. Instead get company A to loan (say) £5,000 to company B as one lump sum. Ensure B pays all its own bills (albeit thanks to money lent by A. If B needs to borrow more money, do it in another round lump sum. If/when B starts doing well, repay it in one lump sum. Up to you whether you pay interest...to my mind probably more trouble than it's worth.

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    Quote Originally Posted by radish2008 View Post
    I was thinking about doing this and was advised that you can only loan clear profits. Is that what you had in mind ?
    No I did not know this. I will check with the accountant. Thanks

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    Quote Originally Posted by TheFaQQer View Post
    The one generated here looks reasonable.
    Brilliant. That does look good. I'll pass on to my accountant to give it a once over. I look the fact that it is explicit about no interest being charged on the principal.

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    Quote Originally Posted by Maslins View Post
    Hmmm...it can be a slightly tricky one for accountants to advise on. We're not lawyers, so not savvy enough to give proper advice on this kind of thing. Also if we say "you'll be fine, just wing it with some DIY agreement" and it all ends up going horribly wrong, you might try to hold us liable. Therefore the "safe" option is just to recommend getting formal legal advice, even if 99% of the time that might be complete overkill.

    My personal thoughts:
    - if you can, do it all personally, rather than direct company to company. I appreciate some people won't want this as can be tax consequences of them either taking more dividends or long term borrowing from the first company.
    - if you do do it company to company, ensure you keep the number of transactions as low as possible. Ie do not just get company A to regularly pay company B's bills, as unless your admin skills are brilliant, you'll get in a right mess. Instead get company A to loan (say) £5,000 to company B as one lump sum. Ensure B pays all its own bills (albeit thanks to money lent by A. If B needs to borrow more money, do it in another round lump sum. If/when B starts doing well, repay it in one lump sum. Up to you whether you pay interest...to my mind probably more trouble than it's worth.
    Thanks. A very helpful response. And I can understand why accountants would be cautious.

    I appreciate some people won't want this as can be tax consequences of them either taking more dividends
    Yes. This is exactly why I want to avoid this option in this current year.

    Instead get company A to loan (say) £5,000 to company B as one lump sum
    That is the plan. Too lazy to do too much admin

    Up to you whether you pay interest...to my mind probably more trouble than it's worth
    Ideally I would like to avoid this, but I have read that if the authorities are sniffing around, having interest added makes appear to be more legit (don't know how true this though)

    Question: What are your thoughts on the template TheFaqqer posted above?

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    Quote Originally Posted by tkmk View Post
    Question: What are your thoughts on the template TheFaqqer posted above?
    I'm sure it's fine. To be honest given as NLUK said it's basically from "you" to "you" if it was me I wouldn't bother with anything formal at all. Surely you're not going to get one company you own to sue the other for breach of loan agreement?!

    ^^this is not professional advice

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