Contributions Question

I disagree. A shareholder is legally separate from the corporation. Any money the shareholder loans to the company is a liability. The terms and conditions of the loan can be non-interest bearing, or interest bearing, due on demand, no specified terms of repayment, or a repayment plan. If the loan is interest free or at a low interest rate, then the shareholder enjoys a taxable benefit that is reported on the shareholder personal tax return.

On the other hand, if the shareholder contributed capital, not a loan, such as the purchase of shares issued from treasury, then its treated as share capital in equity. The type of shares will depend on the share purchase agreement such as common or preferred shares, purchased at par or excess of par.

/r/Bookkeeping Thread Parent