Family Loan w/ Single-Member LLC Question

[David Wilkes]

Hi All!

Brand new to BiggerPockets and am hoping that someone out in the forum community may be able to provide a bit of guidance on an interesting topic for me. As a bit of background, I'm a resident of New York state, have an Ohio registered single-member LLC, and have a bit of idle cash on my balance sheet as well as in my personal bank account.

My brother currently has a decent balance (~$10K) on one of his credit cards that is charging 16% interest, so I figured I would help him out and provide him with a loan to payoff the debt and refinance with a loan from me at a much lower rate (within IRS limits, of course!).

My question becomes, which of the following options makes more sense from a tax standpoint?:

• Provide him with the loan via cash on my LLC's balance sheet, i.e. a loan receivable on my balance sheet with loan documents coming on behalf of my company and record the interest income each tax year on From 1040 Schedule C; or
• Provide him with a personal loan via my own personal bank account, i.e. a loan receivable directly to me (not my LLC) and loan documents that require monthly payments to me (again, not my LLC) over a pre-determined loan term / amortization schedule, and keep track of interest income as it comes in for each tax year

I totally hold harmless anyone that provides "insight" and know that I should consult with legal / accounting experts to get a binding answer, but can anyone throw me a bone with their thoughts / views on what would be most intelligent from a tax perspective? Trying to be as tax efficient as possible with this loan.

Thanks!

Best,

Dave