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HELP!!! HELP!!! HELP!!!

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1 HELP!!! HELP!!! HELP!!! on Sun Oct 04, 2015 7:54 am

thirdsnitch


Arresto Menor
Hello!

Need help please. I have a family member who would like to give a certain some of money to help me out in the business at the same time make it her investment so that she can get some money out of that investment.

She doesn't want nor I wouldn't want her to have a specific percentage of ownership of the business. What is the best way to go about allowing her to earn thru her investment in my business without giving her ownership?

THANKS MUCH!!!

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2 Re: HELP!!! HELP!!! HELP!!! on Fri Oct 09, 2015 1:46 pm

ayelisme


Arresto Menor
thirdsnitch wrote:Hello!

Need help please. I have a family member who would like to give a certain some of money to help me out in the business at the same time make it her investment so that she can get some money out of that investment.

She doesn't want nor I wouldn't want her to have a specific percentage of ownership of the business. What is the best way to go about allowing her to earn thru her investment in my business without giving her ownership?

THANKS MUCH!!!

Make her a "Creditor". Book it as a Loan Payable with interest. She will earn through interest and since she is only a creditor, she doesn't own the business.

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3 Re: HELP!!! HELP!!! HELP!!! on Mon Oct 12, 2015 3:47 am

thirdsnitch


Arresto Menor
Thank you so much ayelisme for the response! Where do I base the interest rate or can you me an idea of what a reasonable rate is?

THANKS MUCH!!!

ayelisme wrote:
thirdsnitch wrote:Hello!

Need help please. I have a family member who would like to give a certain some of money to help me out in the business at the same time make it her investment so that she can get some money out of that investment.

She doesn't want nor I wouldn't want her to have a specific percentage of ownership of the business. What is the best way to go about allowing her to earn thru her investment in my business without giving her ownership?

THANKS MUCH!!!

Make her a "Creditor". Book it as a Loan Payable with interest. She will earn through interest and since she is only a creditor, she doesn't own the business.

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4 Re: HELP!!! HELP!!! HELP!!! on Mon Oct 12, 2015 7:24 am

Lunkan


Reclusion Perpetua
The level of a fair interest depend of how big risk it is you can't pay back. Or do you have any collateral?
IF the risk is very small, then it's fair with around 1 % per month. I mean the REAL risk. You yourself think probably it's no risk Smile because you chose to start that type of business, but without collateral it's allways a risk, because for instance it can be an accident, which can make you can't pay.
The biger risk, the biger interest is fair. (It's TO MUCH to have as in "5-6" = "Bombay" loans.)

The shorter TIME it's suppoused to be paid back, the HIGHER interest per MONTH, because the risk is still similar high, but the lender get less interest when it's less months.

OR is the business done in steps/periods as for instance growing a pig, or you produce/sell in bunch steps? Then it's common the finansiere get money back plus a SHARE of the RESULT. For instance when finansing a rice growth (around 4 months) then it's common the finansiere get money back plus 1/4 - 1/3 od the result, and the one who do the work get the rest.

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5 Re: HELP!!! HELP!!! HELP!!! on Mon Oct 12, 2015 9:01 am

ayelisme


Arresto Menor
thirdsnitch wrote:Thank you so much ayelisme for the response! Where do I base the interest rate or can you me an idea of what a reasonable rate is?

THANKS MUCH!!!


It depends on the amount of loan. Check the feasibility of your business. then try to allocate some of the Net Income to the interest.

Let's say,

Sales = 100,000
Less: Cost of Sales = 60,000
Equals: Gross Profit = 40,000
Less: Expenses = 10,000
Equals: Net Income Before Income Tax = 30,000
Less Income Tax = (30,000 x 30%) = 9,000
Equals: Net Income = 21,000

If the amount of loan is about 100,000. Then try to allocate 5,000 of your earnings. So roughly, that is 5%.

If your sales grows bigger, include a clause on the loan agreement a % of sales in excess of certain amount.

Example:

if the sales exceeds 100,000. 10% of the excess shall be added to the interest

Sales = 150,000 Less 100,000 (threshold) = 50,000 x 10% =5,000 (This is on-top of the interest of 5,000. So it will be 10,000 for that month Smile )

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6 Re: HELP!!! HELP!!! HELP!!! on Mon Oct 12, 2015 3:54 pm

Lunkan


Reclusion Perpetua
@ayelisme
Something like that,
although
if the earning is 30 000p per month BEFORE borrowing, then it's (rather) safe, so then it's better ti agree to a static percent for instance 1 % per month. (And if earning like that, then the loan can be paid back soon Smile

The share is counted BEFORE tax, because the lender pay HIS tax normaly. (=SHOW the interest for BIR. DEDUCT the interest when counting tax for the BUSINESS to BIR. There are some limitation rules for interest though so they need to be checked.)

And if the business is BMBE then the OWNER don't pay any income tax Smile

..
@thirdsnitch So check at your baranggay/municipaly office if your business can be registered as a BMBE.

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7 Re: HELP!!! HELP!!! HELP!!! on Tue Nov 03, 2015 2:46 pm

thirdsnitch


Arresto Menor
Who do I ask for a draft or an agreement we can both sign that the money will be a loan payable to the family member at a specific interest?

THANKS MUCH!!!

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8 Re: HELP!!! HELP!!! HELP!!! on Wed Nov 04, 2015 12:12 am

Lunkan


Reclusion Perpetua
thirdsnitch wrote:Who do I ask for a draft or an agreement we can both sign that the money will be a loan payable to the family member at a specific interest?

THANKS MUCH!!!
If you don't find a template,
you can write it yourself Smile

Loan

From To
xx yy

Amount.

Tell the rules for how the amount will be paid back "automatic"
(and in which situations the lender can demand pay back.)

Interest including telling if it's per month or per year. When to pay the interests.

Date
Sign by both.

Both get an ORIGINAL signed by both.

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9 Re: HELP!!! HELP!!! HELP!!! on Wed Nov 04, 2015 3:10 pm

thirdsnitch


Arresto Menor
Does the agreement have to have like a witness or a signature of a legal officer/lawyers as well?

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10 Re: HELP!!! HELP!!! HELP!!! on Wed Nov 04, 2015 5:55 pm

Lunkan


Reclusion Perpetua
If any question the documement, then the better the more proven corect it is. Witnesses signatures and notarisation add such.
I don't know what BIR say.

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11 Re: HELP!!! HELP!!! HELP!!! Today at 3:24 am

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