Articles by Anna Loginova.
The shareholder’s current account (i.e. the net balance of funds introduced and withdrawn by the shareholder) is one of the most common things that our clients ask us about.
The most frequent questions that we receive are: How did this occur? What does the movement between this year and last year represent? Why does the company owe me money? Why do I owe money to the company?
When a business starts, it does not have its own funds, so naturally shareholders contribute money into the company. This becomes a liability from the company’s point of view. The opposite position occurs when the shareholder withdraws funds from the company. This becomes an asset from the company’s point of view.
The movements in the shareholder’s current account are what have been contributed or withdrawn during the year by the shareholder.
More than one shareholder
If there are two or more completely separate (unrelated) shareholders in a company, it is extremely important to treat their respective shareholder’s current accounts carefully, as this is the actual money that belongs to each shareholder. If this has not been recorded correctly, or a mistake is made, the financial consequences can be significant.
Shareholder’s account in credit
If a shareholder’s current account is in credit (i.e. the company owes money to the shareholder), it can be considered as a loan to the company. Provided that the company has sufficient cashflow, the shareholder can withdraw funds up to the balance of the account without any tax consequences.
Shareholder’s account overdrawn
Issues can occur if the shareholder’s current account is overdrawn. There is a requirement to charge interest on the overdrawn shareholder’s current account. Otherwise, it could be subject to fringe benefit tax (FBT) because the shareholders receive a benefit from the company by using the funds.
If you find yourself in this situation, or you have any other questions about your shareholder current account, please get in touch with your GRA Client Services Manager so we can provide the most appropriate solution, applicable to your individual circumstances. (If you are not a client of GRA, book a meeting to discuss how we can help you – the initial meeting is free of charge if you are new to our practice.)
Hi Salesh, I just wanted to send you an email on behalf of GRA to say how fantastic we have found your company to date. As you know, Ben and I joined GRA a couple of months ago and have just found you so amazingly helpful in getting our new property set up correctly and sorted out. We have what I would consider a rather complicated structure as a result and it’s a fantastic feeling to know that we are getting everything done in the best way possible. We have just had approval to put a minor dwelling on the property which will make a massive difference in terms of cash flow and obviously value, something we would never have even thought of without GRA and which we are very excited about. During the buying process we attended a seminar with Matthew and from the outset thought he was fab. We therein signed up for property school and found this nothing short of fantastic. The content was relevant, up to date and comprehensive, but more importantly it was taught in a way that we could actually understand and really get value out of. I wanted to mention also, that everybody GRA have recommended to us has been just so efficient and absolute masters at what they do. A wonderful network of people that we feel very lucky to now be able to call on. From Kris Pederson and Bryan Rist who put our mortgage together to the insurance guys they then referred us to, I’m super impressed. Within GRA, Ellery has probably turned things around for us faster than I’ve ever known before, something which we appreciated so very much when it came to crunch time. She’s always a pleasure to deal with and again, we’re stoked. We’ve just settled on the property today and are about to go and get the keys. I’m pretty pumped and hence this email is probably rather excitable. So, a massive thank you to you Salesh, the partners for such a fabulous 6 weeks at property school and everyone at GRA for their help. May this be the start of our property empire. Thanks again, - A & B - July 2015
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