loan money to my own company, or call it an equity contribution?

[tallen]

So my company (S-corp, 50% share, spouse owns other 50%) needs some money to pay for the acquisition of a depreciable asset; I have the money personally. Should I loan the money to the company with reasonable payback and interest terms, or should I call it an additional equity contribution?

Has anyone here done the loan thing? Any pitfalls to watch out for?

[Freelancier]

This is one you should talk over with your accountant. There's no one right answer, except for the right answer that applies to your specific financial situation and your accountant is in the best position to make a recommendation and structure it to your advantage.

As a non-accountant, I may be wrong, but: Because this is an S-Corp, the interest it pays you would be taxed at the same rate as a dividend you take, which is to say: just like ordinary personal income without the payroll taxes. So I don't see a strong case for doing a loan, except that you can keep score when you get paid back and use it as an excuse to take regular monthly or quarterly payments that aren't dividends (and don't have to be split evenly between the two of you). But that gets into the whole marital thing, so maybe it's better to have your accountant in the room when talk about this. :)