Business Loans Can Be All in the Family in Virginia

Interfamily loansWith entry-level jobs in short supply, it's tempting for parents to try to help their adult children start businesses. 

If you have an adult child asking you for investment capital to launch a new business, you may be strongly tempted to comply. It might be a good investment, or it might not. Either way, an article in The Wall Street Journal points out several things you can do to preserve both your capital and your relationship.


  • Understand that most start-up businesses fail within the first few years, so there is a good chance that your “investment” will not pay off, or if it does, it may take longer than you expected. Decide now whether you are making a gift with no expectation of getting your money back, an investment for an equity position, or a loan at a favorable interest rate. There is no single right answer, but make sure everyone is on the same page about the nature of your investment. Also, be sure to consult your attorney about any gift- and estate-tax implications.
  • Get it in writing. Families often “forget” this important aspect of any financial deal, but it’s important for both sides to put the terms in writing to prevent misunderstandings down the road. Remember, if you want to preserve both your money and your relationship, a written agreement is your friend. For this type of family transaction to pass muster with the IRS you must structure it as if it was an "arms length" transaction that any  lender would willingly offer an unrelated borrower. 
  • Treat your child like an adult. Don’t become a nagging parent, rather try to foster an environment that encourages your child to come to you with open, honest communication. Allow your adult child to run the business without unnecessary interference.
  • Give advice as needed. It’s a fair bet that your child has never run a business before; in fact, he or she may not have much business experience at all. Consider taking an advisory role, and don’t be surprised or indignant if your first-time CEO makes a few rookie mistakes.
  • Examine your own motives. Make sure you are providing funds to help the fledgling business rather than using money to buy your kids’ love.

You can learn more about this topic as well as other strategies on our website under the tab entitled: business planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate plan-ning.

Reference: The Wall Street Journal Online (June 7, 2011): For You, Graduate, Some Start-Up Capital

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment


We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.