Legal Question in Business Law in California

Re: Is there taxes on money borrowed to start and operate a business?

Generally speaking, borrowed money is not income.

Re: Is there taxes on money borrowed to start and operate a business?

Borrowed money is not taxable. However, you may be illegally selling securities.

Re: Is there taxes on money borrowed to start and operate a business?

Borrowed money is not taxable and loans need not be reported to the IRS. There are a couple of things to keep in mind however. In answering this question, I have made a couple of assumptions: 1. I have assumed that the loans are not secured, and particularly not secured by any interest in the stock of the new company; and 2. The loans are not convertable into shares of stock in the new company. Be sure to document the loans and make it clear the the loans are really loans with specific provisions for repayment. If they are construed as gifts and they are large enough in amount, the IRS, assuming they find out about them, might construe them as gifts and impose a gift tax on the lender(s). How might the IRS find out? In the (admittedly highly unlikely but dismal) event that the business fails and you are unable to repay the loans, the lenders may choose to write them off against income as a bad debt. Best of luck in the new venture.