Legal Question in Business Law in California

Re: s-corp loan

Capitalizing a newly-formed corporation properly should be part of every corporate founder's business plan. It is important to inject some cash equity investment into the new corporation so it can pay its bills and have a reasonable balance between debt and equity. Having 0% equity and 100% debt (such as a loan payable to a founder as you seem to be considereing) is not wise, as it sets the corporation and founder up for possible veil-piercing.

You have or will be issuing stock to yourself, and perhaps others, right? I recommend establishing a value per share, which can be pretty arbitrary, and exchanging stock for money or other property of value. For example, if the corporation will need $10,000 for incorporation costs, inventory, office supplies, utility deposits, rent, etc. before it has positive cash flow from operations, have the corporation sell you 2,000 shares at $5 per share, and put $10,000 of your money into its separate bank account. This is an equity investment, it become part of the corporation's permanent capital, it is not a loan, and the corporation doesn't have to (re)pay principal or interest. Then, the corporation can use its own money to pay its bills, including paying you amounts it legitimately owes you for expenses you bore on its behalf.

There are cases saying lending up to about 70% of a new corporation's capital needs to it in the form of founder loans is not excessive, but on the whole a brand-new corporation really ought to derive a larger percentage of its startup capital as equity (e.g., purchases of its stock by the founders or other risk investors) rather than as loans.

To answer your question, since the loan is between you and a corporation you control, a simple promissory note should be fine; be sure to specify an interest rate and a due date. The corporation should have a resolution in its books authorizing or ratifying the transaction. The interest rate should not be so high as to be usurious. The sophistication of the documentation would be greater if we are talking say $50K rather than $10K, or if there are multiple shareholders.

Maybe you should get and read a couple books about forming and operating new corporations.