Four biz partners, borrow money to pay yourself. Something is not right.

[Dan Carlson]

Hi,
I have 3 business partners and we are all working full time. Our product is completed and have clients and it's the time where we take the plunge and go full time. Exciting times! But i have two business partners that does not have enough savings to live without a paycheck. We have no employees, it's all partner owned business at this point. So they want to borrow money from the bank to pay ourselves some salary. It doesn't make sense to me. If we borrow money from the bank as a company and pay ourselves salary, don't we have to take federal and other taxes out? So it's like borrow money to pay taxes. So I think a personal loan make more sense but I'm not 100% sure. Anyone have this experience or point me to material that I can reference?

 

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[Kyle Tully]

Tell them to get a job if they want money.

 

[jon.a]

Try to imagine explaining that one to an investor. Now you want them to give you money to pay back the loan you took out to pay yourselves salaries that your company couldn't afford? Get new partners. I'd take out a loan to buy them out.

 

[chrischapman]

If the partners who don't have to borrow (yourself) are dipping into personal savings (dissaving) to support yourselves, then the partners with little savings should also borrow money (also dissaving) if they don't have it to support themselves. they should borrow money separate from the business.

if borrowing is linked to the business, there could be tensions within the partnership later on if things don't work out as planned. personal loan makes more sense, they should borrow for living costs on their own.

 

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[MikeAU]

Evening and weekend jobs would be the way there. That gives them money coming in to cover living costs an frees up there days to work on the biz. Not easy but better than having personal loans that could hinder future money raising.


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[Nate-NewVenture]

Interesting thought: Researchinf this very point, Owners/partners average $0-$45,000/year salary on startup. This is a provable number. I ain't gonna get paid a dime until my traction starts. How do I supplement? Slow lane jobs. It's ok though because I'm investing every non Slowlane time to the Fastlane!

 

[RHL]

Tell them to get a job if they want money.

Sprained my index finger from clicking "like" so hard. Seriously, do not take out that loan.

 

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[CommonCents]

tell them to get a personal loan. It should be a big red flag to you that they even suggested it in the first place. Hopefully you have everything in writing and partner exit plans already agreed to.