I loaned $60,000 to my own single owner LLC over the past 6 moths to pay for start up, salaries, rent and business expenses to get it started.
It is now moving towards profit and can afford to start paying back that loan.
My question is can the loan repayments be paid from the income before tax, or can it only be paid from taxed income? Where is this stipulated in the tax code?
So which of these is correct:
Case 1: Income - ongoing business expenses - loan repayment = profit which is taxed or Case 2: Income - ongoing business expenses = profit which is taxed and loan is paid from residual profits.
My instinct is it should be Case 2 because if the LLC had sufficient income from the start then salaries, rent etc. would have been paid and treated as a business expense?