Shareholders: listen up or you could trigger unnecessary dividends tax!
As a shareholder, you probably make and take loans to and from your company.
But do you understand the serious consequences from SARS if you don't account for these loans correctly?
Added to that, some shareholders aren't aware their liability is limited, even though the company is a separate legal entity.
Read on and I'll show you the negative implications of shareholder's loans so you can avoid them...
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Shareholders liabilities in your company's debt and obligations
Basically, no one can claim the money your company owes to suppliers from you in your personal capacity.
But if you sign personal surety for debt, this obviously changes. You become personally liable for those debts.
And, if you're also the director, you're probably involved with the day-to-day running of the company. The court could find you responsible for the company's debts.
Read on to find out what happens if you don't account for shareholder's loans correctly.
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Three negative effects of incorrect accounting on shareholder loans
Many directors of companies are granting loans without looking at the liquidity and solvency of the company. If you do this, your company might not be able to pay debts in the near future;
You could be found non-compliant with section 45 of the Companies Act. If your company can't cover its obligations, then creditors and employees can hold your company directors personally liable for repaying these obligations; and
You could also trigger dividends tax. SARS will demand 15% of the loan amount for this!
Are you prepared to give that up?
To find out more on how to account for shareholders loans correctly get your copy of the Practical Accountancy Loose Leaf here…