Intercompany loans between LLCs you own

An intercompany loan between two LLCs you own rarely starts with anyone calling it a loan. The property company has cash, the coffee shop is short for payroll, and $20,000 moves between their bank accounts on a Monday afternoon. In the files we review, the property company’s books often call it an expense or a draw, the coffee shop’s books call it income or an owner contribution, and nobody notices until the tax preparer asks why the two companies disagree about who owes what.

This post walks through one loan between two single-owner LLCs, recorded in both QuickBooks Online files: the accounts, the entries, the monthly check that the two sides agree, the interest question, and the paperwork that makes a transfer a loan. The tax rules depend on how each LLC is taxed, and each section says which one it is about.

One loan, two sets of books

Each LLC has its own QuickBooks Online company, so one loan is recorded twice: once by the company that lent the money and once by the company that owes it.

Company	What it records	Account	Balance sheet section
The lender	Money the other company owes it	Loan to Northside Coffee	Asset
The borrower	Money it owes the other company	Loan from Northside Properties	Liability

Name each account after the company on the other side. When you own four companies, “Intercompany loan” tells you nothing; “Loan to Northside Coffee” tells you exactly which file holds the matching balance. Some bookkeepers use Due from and Due to accounts for the same balances. The label matters less than keeping one pair of accounts per pair of companies, used the same way in both files.

The entries in both files

Northside Properties LLC lends Northside Coffee LLC $20,000 on October 5, 2026. The signed note sets 5% annual interest, with $2,000 of principal plus the month’s interest paid on the 5th of each month.

In Northside Properties’ file (the lender):

Date	Account	Account type	Debit	Credit
Oct 5	Loan to Northside Coffee	Other Current Assets	20,000.00
Oct 5	Properties Checking	Bank		20,000.00

In Northside Coffee’s file (the borrower):

Date	Account	Account type	Debit	Credit
Oct 5	Coffee Checking	Bank	20,000.00
Oct 5	Loan from Northside Properties	Other Current Liabilities		20,000.00

Neither entry touches the profit and loss. The lender swapped cash for a receivable, and the borrower has more cash and an equal debt. Each entry matches one line on that company’s bank statement, which is what lets the bank feed carry it.

On November 5 the coffee shop pays $2,000 of principal and $83.33 of interest, which is one month at 5% a year on $20,000.

Northside Coffee (the borrower):

Date	Account	Account type	Debit	Credit
Nov 5	Loan from Northside Properties	Other Current Liabilities	2,000.00
Nov 5	Interest Expense	Expense	83.33
Nov 5	Coffee Checking	Bank		2,083.33

Northside Properties (the lender):

Date	Account	Account type	Debit	Credit
Nov 5	Properties Checking	Bank	2,083.33
Nov 5	Loan to Northside Coffee	Other Current Assets		2,000.00
Nov 5	Interest Income	Other Income		83.33

The December 5 payment is $2,000 of principal and $75.00 of interest, one month at 5% on the $18,000 still owed. Only the interest reaches either profit and loss: an expense for the coffee shop, income for the property company.

These books are kept on the cash basis, so interest is recorded when it is paid. On the accrual basis, both files also accrue the interest earned between the payment date and month end, for the same amount, so the pair still agrees.

The monthly tie-out

At every month end, the lender’s receivable must equal the borrower’s payable. If it does not, one of the two files is wrong, and the month should not be called closed in either one until the difference is found.

Month end	Properties: Loan to Northside Coffee	Coffee: Loan from Northside Properties	Difference
Oct 31	20,000.00	20,000.00	0.00
Nov 30	18,000.00	18,000.00	0.00
Dec 31	16,000.00	16,000.00	0.00

When the two numbers do not agree, the cause is nearly always one of these:

What you see	Usual cause	Fix
A balance in one file, nothing in the other	The transfer was categorized as income, an expense or equity in one file	Recategorize it to the loan account in that file
A difference equal to one transfer	The transfer cleared one bank on the 31st and the other on the 1st	List it as in transit on the tie-out and confirm it clears the next month
A difference equal to the interest	The payment was split into principal and interest in one file but not the other	Split it the same way in both
A difference that grows every month	One company pays some of the other’s bills, booked on one side only	Record each payment on both sides, or move them to a separate Due to and Due from pair

The last one is the most common. A company that pays another’s insurance or payroll creates a balance between them even when nobody meant to lend anything. Keep those short-term amounts out of the note-backed loan, in their own pair of accounts, so the loan balance still matches its repayment schedule.

Is it a loan, a contribution or a distribution?

Money moving from one of your LLCs to another can be recorded three ways, and the choice changes both balance sheets.

What it is	In the company the money leaves	In the company it reaches	What it needs to hold up
A loan	Loan to the other company (asset)	Loan from the other company (liability)	A note, a rate, and repayments that actually happen
A distribution, then a contribution	Owner Distributions (equity)	Owner Contributions (equity)	Nothing to repay; the money passed through you on paper
A payment for goods or services	Income	Expense	An invoice for real work at a fair price

For federal tax purposes, a balance counts as a debt only if there is “a valid and enforceable obligation to pay a fixed or determinable sum of money,” and “a gift or contribution to capital shall not be considered a debt” (Treas. Reg. §1.166-1(c)). A transfer recorded as a loan with no note, no interest and no repayment in three years may be treated as a distribution and a contribution instead, whatever the books say.

Which label is right is a decision for you and your tax preparer, and it can turn on how each LLC is taxed. The bookkeeping job is to record the decision the same way in both files, on the same date, so it can be changed in one entry per file if the preparer reclassifies it.

Do you have to charge interest on a loan between your LLCs?

It depends on how the two LLCs are taxed.

Both are single-member LLCs you own personally

A single-member LLC that has not elected corporate treatment “is disregarded as an entity separate from its owner” (Treas. Reg. §301.7701-2(c)(2)(i)). For federal income tax, both companies are you, so a loan between them is a loan from you to yourself, and the interest on it is money moving between your own pockets. In this case the interest rate has no federal income tax effect. It is still worth writing a rate into the note: lenders and state law treat the two LLCs as separate, and the answer changes the day either company adds a member or elects S corporation status.

The exception is a foreign owner. A disregarded LLC wholly owned by a foreign person is treated as a corporation for the reporting rules in IRC §6038A (Treas. Reg. §301.7701-2(c)(2)(vi)), which is why it files Form 5472; the records that form needs are in Form 5472 filing requirements for your books. That form covers loans in both directions: amounts borrowed go on line 17 and amounts loaned on line 31 of Part IV, either as beginning and ending balances or as a monthly average. A related party includes any person related to the LLC within the meaning of §482, which reaches other companies with the same owner. The IRS instructions (revised December 2024) set the penalty for not filing at $25,000, and another $25,000 for each 30 days, or part of 30 days, that the failure continues more than 90 days after an IRS notice.

Either one is taxed as a partnership or a corporation

When the two companies are separate entities for federal tax purposes, the IRS can reallocate interest between “two or more organizations, trades, or businesses” under common control (IRC §482). Where one lends to the other and charges no interest, or a rate that is not arm’s length, the IRS may make allocations “to reflect an arm’s length rate of interest” (Treas. Reg. §1.482-2(a)(1)(i)).

The regulation gives a safe haven: a rate between 100% and 130% of the applicable federal rate is accepted for a US dollar loan, unless the lender is regularly in the business of lending to unrelated parties (Treas. Reg. §1.482-2(a)(2)(iii)(B)).

IRC §7872 can also apply. It covers below-market loans “directly or indirectly between a corporation and any shareholder,” and in Rountree Cotton Co. v. Commissioner, 113 T.C. 422 (1999), the Tax Court applied it to a corporation’s loans to family-owned entities in which its shareholders held an interest. If either of your LLCs has elected S or C corporation status, assume the rate matters.

What rate to use

The IRS publishes the applicable federal rates every month in a revenue ruling. For October 2026 (Rev. Rul. 2026-19, annual compounding):

Term	Loan length	AFR	130% of AFR
Short-term	3 years or less	4.25%	5.54%
Mid-term	Over 3 years, up to 9	4.61%	6.02%
Long-term	Over 9 years	5.22%	6.81%

The term bands come from IRC §1274(d). Use the table for the month the note is signed and write the rate into the note; the current month’s ruling is on the IRS applicable federal rates page. The 5% in the Northside example sits inside the safe haven for a short-term loan made in October 2026.

One timing rule catches small groups. If the borrower keeps its books on the accrual basis and the lender is on the cash basis, and the two are related under IRC §267(b), the borrower cannot deduct accrued interest until the lender includes it in income (IRC §267(a)(2)). Interest that accrues for years without being paid is deducted only in the year it is finally paid. Paying it on schedule avoids the problem.

How to set up the loan accounts in QuickBooks Online

The standard QuickBooks Online plans keep each company in its own file and do not link one company’s entries to another’s, so both sides are entered by hand. Intuit’s multi-entity tools, such as intercompany bills and allocations, are part of Intuit Enterprise Suite.

In the lender’s file

Intuit’s steps for tracking a loan you make work for a loan to another of your companies:

1. Go to All apps, then Accounting, then Chart of accounts.
2. Select New, then Assets.
3. From the Save account under and Tax form section dropdown, select Loans to Others. In a file that still shows the older form, choose Other Current Assets as the account type and Loans to Others as the detail type.
4. Name the account Loan to Northside Coffee, and select Save without entering an opening balance.

In the borrower’s file

1. Open the Chart of accounts and select New.
2. Choose Other Current Liabilities as the account type and Loan Payable as the detail type, as in Intuit’s line of credit article.
3. Name it Loan from Northside Properties and save.

A note that runs past 12 months is often shown as a Long Term Liabilities account in the borrower’s file and a long-term asset in the lender’s. Your preparer may want the split at year end; the matching works the same way.

Recording the activity

• The loan itself: in the lender’s bank feed, categorize the outgoing transfer to Loan to Northside Coffee. In the borrower’s bank feed, categorize the incoming deposit to Loan from Northside Properties. Do not let either feed match it to an invoice, a sale or an owner account.
• Each repayment, borrower side: select + Create, then Expense, with one line to Loan from Northside Properties for principal and one to Interest Expense.
• Each repayment, lender side: select + Create, then Bank deposit, with one line to Loan to Northside Coffee and one to Interest Income.

If both companies bank at the same institution, each transfer still appears in two bank feeds, and each file records only its own side.

What to keep for each intercompany loan

Intercompany loan documentation for a small group is short. What matters is that it exists before the money moves, and that the books follow it.

• A signed note with both companies’ legal names, the amount, the interest rate, the repayment schedule and a maturity date. A demand loan, repayable whenever the lender asks, should say so.
• Member approval, if either LLC has more than one member. Your operating agreement says who has to sign.
• A loan register for each pair of companies: date, amount advanced, principal repaid, interest paid, balance, and the bank reference for each line. It is the schedule the monthly tie-out checks both files against.
• The bank statements for both companies, which show the money moving on the dates the register says.

We do not draft notes or set rates. An attorney drafts the note, and your preparer confirms the rate and the label. Once those are decided, the books follow them in both files.

Common questions about loans between LLCs

Can one LLC loan money to another LLC?

Yes, unless an operating agreement or a bank loan covenant restricts it. Record it as above, in both files, with a signed note. Without the note and the matching entries, the same transfer is easy to read later as a distribution, a contribution or income.

Can I transfer money from one LLC to another without paying taxes?

Cash recorded as a loan is not income to either company, as long as it is a real loan. Cash recorded as a distribution to you and a contribution to the other company may or may not be taxable, depending on how the paying LLC is taxed. A distribution from a company taxed as a C corporation, for example, is a dividend to the extent of its earnings and profits (IRC §§301 and 316). Between two disregarded single-member LLCs it has no federal income tax effect at all. Ask your preparer before money moves, not after.

Can an intercompany loan be written off?

Only a bona fide debt can be deducted as a bad debt under IRC §166, and a contribution to capital is not one (Treas. Reg. §1.166-1(c)). Between two companies with the same owner, your preparer will look at whether it was ever a real loan: a note, interest and repayments. Between two disregarded single-member LLCs there is nothing to deduct, because the money never left you for tax purposes.

Is intercompany loan forgiveness taxable?

Cancelled debt is generally income to the borrower (IRC §61(a)(11)), with exceptions in IRC §108. Between companies with the same owner, forgiving a loan can instead be treated as a distribution from the lender and a contribution to the borrower, depending on how each is taxed. Between two disregarded single-member LLCs, forgiveness has no federal income tax effect, for the same reason as the write-off. Decide it with your preparer, then record it in both files on the same date so the pair still matches at zero.

Can I lend money to my LLC personally?

Yes, and that is a different pair of accounts: a loan between you and the company, not between two companies. The entries for a corporation are in shareholder loans, and how each kind of LLC handles owner money is in bookkeeping for an LLC.

How do intercompany loans show on consolidated statements?

They disappear. Consolidated statements combine the companies as one group, so the receivable in one file and the payable in the other cancel out. Most small owners do not prepare consolidated statements, but a bank lending to the group may ask for combined figures, and a pair that does not match is the first thing that shows.

When to hand this off

One loan between two companies is a few entries a month. Four companies lending to each other, paying each other’s bills and moving cash at quarter end is a reconciliation that only works when one person can open every file. The everyday entries behind it, from owner contributions to loan payments, are in the journal entry examples.

Ledgerbrook keeps each company in its own QuickBooks Online file, closes every file by the 5th business day, and ties out each intercompany pair before any of them is called closed. Each file is priced by its own size from $99 a month, and the intercompany reconciliation is charged once, in the $199 plan on the file that carries it. How a group is priced is on bookkeeping for multiple LLCs. Every file in the group has to close before the preparer can work from any of them, so a group heading into year end should start from working back from a deadline.

When to hand this off: if two of your companies disagree about what one owes the other at year end, and more than one closed month is affected, both files need the same months reopened and matched. A free file review starts with the file that has the most transfers.