Promissory Note HELP
Does it make sense to make a promissory note between myself as the maker and my business cooperation (me as the president) as the holder? I am being asked for a promissory note between myself and my corporation in which I used my own money to purchase.
Hello and thank you for your question.
Yes, it makes sense for you to draft a promissory note between you and your business if you spent personal money to purchase company equipment or other supplies. However, it would appear that the promissory note should be held by you and issued (made) by the company.
One of the biggest requirements in a corporate entity is keeping personal and business assets separately. If you use personal money to pay company bills or obligations, this can cause you to give up limited liability protections later one. By setting up a promissory note, you are effectively creating a record of you lending money to the company for the purchase of equipment. This keeps your assets separate from the company’s and helps to protect you from personal liability.
You can read more about personal liability in different corporate structures in our article on LLCs vs S-Corps vs C-Corps or check back later as we publish more content on this topic.