International Private Money Lenders

[William Allen]

I have some contacts in England who are interested in investing with our company.  I will speak to my CPA in a few weeks about the details on this but I figured there must be someone on BP who has raised foreign money in the past.  Any gotchas to look out for?  I would be interested in hearing from any of you who have been down this road in the past.  Thank you!

[Linda Weygant]

So these folks will be loaning money, not be in an equity position?

This is a much simpler scenario and was not clear at all (at least not to me).

As I'm sure you know, if you pay more than $10 in interest to a US lender, you should issue a 1099-B to them at the end of the year.

This will be unnecessary for foreign investors.  Because they are not US residents, they will not have social security numbers, nor are they required to have them (or an ITIN), so you can't issue 1099-B forms to them.  They have no tax reporting requirements in the US.

If you are a purely US company, with no holdings or presence in the UK, you have no reporting requirements to the British Inland Revenue Service either.

I have not researched it myself, but my British friend tells me that interest earned by a UK citizen, living in the UK, but from a foreign source is not taxable in the UK, so you are not technically required to report the amount of interest paid, even to the investor, although I would think you would want to do so as a courtesy.