I'm in a quandry and need to know the best way to book this situation to correct any potential messiness etc.
One director of ltd company. 'investor' friend who's come on board with the agreed intention of at some point him being made a shareholder/director. In the meantime he has input some money to the company.
Has also has been put on payroll as a consultant.
Incurring expenses for the company - usual items - equipment, purchases paid by him.
Not sure how to position this -
I'm probably being stupid so bear with me:
If he was a director then I would be fine to book his expenses to be reimbursed as out of pocket expense or increase loan to company and capital introduced to company etc. BUT as he is currently an employee incurring expenses for business It threw it for me (expenses to be reimbursed are for business purchases) but the employee is also technically a creditor to the company as he loaned money to the company.
What is the best and correct way to deal with this going forward - I am at a unique point where this can be dealt with.
Advice greatly appreciated.
thanks guys!!
-- Edited by Telnkate on Wednesday 9th of April 2014 10:27:01 PM
I would consider the investment and the employment seperately.
The potential director has made a loan to the business both in form of the direct input of cash and assets, plus personally incurred expenses.
Some of the expenses the company will be able to reimburse as they would be able to with any other employee, others will need to go to a loan account that is not a directors loan account so recognising the liability and the associated movement in bank and assets through the company books.
For now, as I say I would open a loan account for the investor and at a later stage you may be asked to turn the loan into shares moving it from a liability to equity (so improving gearing).
HTH,
Shaun.
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Shaun
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