When you pay with your own money

Sometimes the owner pays for a company cost with personal money, or takes money out of the company and it is not a salary or a dividend. The books must record this. The usual way is an owner loan: a balance between the company and its owner that shows who owes whom.

What an owner loan is

An owner loan is money the owner has put into the company, or taken out of it, that the company will settle later. If you pay €300 for a company software subscription from your personal card, the company owes you €300. That amount is a liability of the company: an owner loan balance.

Money in and money out

• When the owner pays a company cost, the owner loan balance goes up, because the company owes the owner more.
• When the owner takes money out of the company as a loan, the balance goes the other way, and the owner owes the company.

The sign of the balance tells you which way the debt runs. A positive balance means the company owes the owner. A negative balance means the owner owes the company.

What settles it

The owner loan is settled when the company pays the owner back, or when the balance is cleared in another way that the company and owner agree. Each settlement is a payment and is recorded as one.

Things to check

• Keep the receipt for each personal payment for the company.
• Many owners write the terms of a loan into a short agreement. The terms are yours to set.
• Interest on a loan and the tax treatment of a loan depend on the rules and on the agreement. Check them before you set them up.

Sapita records the owner loan balance on the balance sheet. It does not decide how the balance should be settled.