Can a loan be paid back
By Gord Ahier | January 25, 2010
Can I pay back a loan for buying a business from business earned capital. Are there any income tax implications. This is a hairdressing salon in Kelowna, B.C.
Gord Ahier answered:
The question will revolve around whether the business is incorporated or not. If you bought shares of a company that operates a hair salon business, you will need to withdraw funds from the company so that you can pay the purchaser. This will normally give rise to personal income tax on the funds withdrawn. On the other hand, if you are operating a sole proprietorship, than the payment to the vendor by the proprietorship does not give rise to personal income tax in your hands.
We would suggest you contact your accountant to discuss your question and equally important to decided if paying down personal debt would be better for you.