I took a personal loan from an "angel investor" to develop a product.
As the money was a personal loan, I did not declare the money I used as income as I need to pay it back.
The loan is attracting interest at the Prime Rate.
I have now formed a company (pty ltd) to market/sell/service the product I have developed.
What is the most tax effective way of getting the loan into the company as an expense?
I have been told that I have two options:
1. Take extra salary and pay the marginal rate on it and put the "deferred salary" into the loan account until it equals the amount borrowed.
AND Charge SARS allowed interest on the unpaid amount.
2. Sell the product into the company for the amount borrowed and pay CGT on the amount specified.
AND charge interest on the unpaid amount as it will be in unpaid liabilities.
Are these valid options or is there a LESS EXPENSIVE way of doing this?
The problem being - none of the expenses incurred developing the product hit the new company - it was a personal (relationship based) loan.
The reason I am asking this now, is that I am starting to get tentative probes from a company in a similar space and it looks like they want to buy control of the company, pay off the loan accounts and provide funding to get the product rolled out into the Middle East.
What is my cheapest LEGAL route of getting this loan into the company???
Please help URGENTLY - books are due at the end of the month... LOL!!