Shareholder loans can involve money moving in either direction between a shareholder and their corporation. In Planworth, the modelling approach depends on who is lending the money and whether the loan already exists or is planned for a future year.
This article explains how to model all four situations, including the initial loan, repayment, and applicable limitations.
Identify the Type of Shareholder Loan
Before modelling the transaction, determine which situation applies:
Shareholder loan: The shareholder lends money to the corporation.
Shareholder advance: The corporation lends money to the shareholder.
Based on whether it is a loan or advance and if it exists already or is planned determines which section of this article applies.
Existing shareholder loan
New shareholder loan
Existing shareholder advance
New shareholder advance
1. Existing Shareholder Loan
Use this approach when a shareholder has previously lent money to their corporation and you want to model the outstanding balance and future repayments.
Step 1: Enter the existing loan
Open the client's Evaluation.
Navigate to Corporation → Misc. Debt.
Add a Misc. Debt using the following settings:
Step 2: Model the repayment
Open the scenario in Financial Insights.
Create a Corporate Shareholder Loan Repay toggle.
Select the corporation and the shareholder loan entered in Step 1.
Enter the Repay Amount and the year of repayment.
Use the recurring option if repayments will occur regularly.
Planworth reduces the corporation's outstanding loan balance and shows the repayment as a tax-free cash receipt to the shareholder, since the shareholder is receiving their original loan principal.
Important considerations
Repayments are limited to the corporation's available funds. If insufficient cash is available, the repayment may be smaller than requested.
Planworth will not repay more than the outstanding loan balance.
Depending on the plan's withdrawal order, Planworth may also access the shareholder loan balance automatically when the household requires cash.
Interest is not automatically charged on the loan. To model interest, add two toggles:
Other Taxable Inflow: models the interest income received by the shareholder.
Corporate Misc. Non-Deductible Expense: models the interest paid by the corporation.
Note: Enter the interest as a fixed annual dollar amount, and use the same start and end years on both toggles. End them in the same year the loan is fully repaid and update the amounts manually if the balance changes.
2. New Shareholder Loan
Use this approach when a shareholder intends to lend money to their corporation in a future year. Unlike an existing loan, a new shareholder loan must also account for the initial transfer of funds from the shareholder to the corporation.
Step 1: Create the new loan
Open the scenario in Financial Insights.
Create a New Corporate Misc. Debt toggle.
Complete the following fields:
Example: PU plans to lend $200,000 to his corporation in 2030. Create a New Corporate Misc. Debt toggle for $200,00 beginning in 2030, with PU selected as the shareholder.
Planworth will:
Use the shareholder's available cash flow first to fund the loan.
Access the shareholder's personal accounts according to the plan's withdrawal order if additional funds are required.
Transfer the funded amount into the corporation.
Record the amount as a debt owed by the corporation to the shareholder.
If the shareholder does not have sufficient funds, the toggle will be flagged as not fully funded, with the shortfall displayed.
Note: Withdrawals from registered accounts used to fund the loan may be taxable, just like other registered account withdrawals.
Step 2: Model the repayment
To repay the loan in a future year:
Create a Corporate Shareholder Loan Repay toggle.
Select the corporation and the shareholder loan created in Step 1.
Enter the repayment amount and year.
Planworth will reduce the outstanding loan balance and return the principal to the shareholder as tax-free cash, subject to the corporation's available funds.
Important considerations
Repayments are limited to the corporation's available funds. If insufficient cash is available, the repayment may be smaller than requested.
Planworth will not repay more than the outstanding loan balance.
Depending on the plan's withdrawal order, Planworth may also access the shareholder loan balance automatically when the household requires cash.
Interest is not automatically charged on the loan. To model interest, add two toggles:
Other Taxable Inflow: models the interest income received by the shareholder.
Corporate Misc. Non-Deductible Expense: models the interest paid by the corporation.
Note: Enter the interest as a fixed annual dollar amount, and use the same start and end years on both toggles. End them in the same year the loan is fully repaid and update the amounts manually if the balance changes.
3. Existing Shareholder Advance
Use this approach when a corporation has previously lent money to a shareholder, such as to help finance a home purchase, and you want to model the outstanding loan and its repayment. Because the money has already been transferred, you only need to represent the existing balances and future repayment.
Step 1: Enter both sides of the existing loan
Create a personal debt to represent the shareholder's obligation and a corporate asset to represent the corporation's loan receivable.
Side | Location | What to enter |
Personal | Evaluation → Add Personal Misc. Debt | Type: Other Loan Payable; balance equal to the outstanding loan |
Corporate | Evaluation → Corporation → Misc. Assets | FMV = ACB equal to the outstanding loan; growth 0%; income $0 |
Example: A corporation previously lent $200,000 to a shareholder, with repayment expected in 2028. Enter a personal Misc. Debt of $200,000 with a 0% interest rate and a corporate Misc. Asset with a FMV = ACB of $200,000.
The corporate Misc. Asset represents the loan receivable rather than a traditional investment. Setting its growth and income to zero prevents the asset from generating investment returns or income.
Step 2: Model the repayment
In the repayment year, create matching toggles on both sides:
Side | Toggle | Setting |
Personal | Other Debt Additional Payment | Repay the outstanding personal Misc. Debt |
Corporate | Sale of Corporately Owned Misc. Asset | Sell the corresponding percentage of the corporate Misc. Asset |
For the $200,000 example, create a $200,000 Other Debt Additional Payment toggle and sell 100% of the corporate Misc. Asset in 2028.
The personal debt decreases, while the sale of the corporate asset returns cash to the corporation. Because the asset's value and cost are equal and its growth is zero, the sale does not generate a capital gain.
For instalment repayments: Create a debt payment and a corresponding partial asset sale in each repayment year. The percentage sold should reflect the proportion of the original loan being repaid.
Step 3: Model interest payments (optional)
If the shareholder is paying interest to the corporation, use separate toggles:
Side | Toggle | Purpose |
Personal | Major Expense | Represents the shareholder's interest payment |
Corporate | Corporate Misc. Passive Inflow | Represents the corporation's taxable interest income |
Enter matching interest amounts in the applicable years. Planworth does not automatically link the personal debt and corporate asset or calculate interest between them.
Verify the results
Confirm that the shareholder's personal debt and the corporation's Misc. Asset reflect the same outstanding principal. In the repayment year, the personal debt and corporate asset should decrease by corresponding amounts, and corporate cash should increase by the amount repaid.
4. New Shareholder Advance
Use this approach when a corporation intends to lend money to a shareholder in a future year, such as to help finance a personal home purchase. Planworth does not currently have a dedicated toggle for creating a new corporation-to-shareholder loan. Instead, you can model the transaction using matching personal and corporate toggles. This approach captures the movement of cash but does not create a tracked personal loan liability.
Step 1: Model the advance
Example: A corporation plans to lend $200,000 to a shareholder in 2028. The shareholder intends to repay the amount in 2029.
Create the following toggles for 2028:
Side | Toggle | Setting |
Personal | Non-Taxable Inflow | $200,000 |
Corporate | Purchase of Corporately Owned Misc. Asset | Value $200,000; growth 0%; income $0 |
The Non-Taxable Inflow represents the funds received by the shareholder. The corporate Misc. Asset represents the amount owed back to the corporation. Setting growth and income to zero prevents it from behaving like an investment.
Step 2: Model the repayment
In the year the shareholder repays the advance, create the following toggles:
Side | Toggle | Setting |
Personal | Major Expense | $200,000 |
Corporate | Sale of Corporately Owned Misc. Asset | Sell 100% of the asset created in Step 1 |
The Major Expense represents the cash paid back by the shareholder, while the corporate asset sale returns the funds to the corporation. For instalment repayments, create a Major Expense and a corresponding partial asset sale in each repayment year.
Step 3: Model interest payments (optional)
If the shareholder pays interest on the advance, create:
A Major Expense toggle for the personal interest payment.
A Corporate Misc. Passive Inflow toggle for the matching corporate taxable interest income.
Verify the results
Review the plan to confirm that:
Corporate cash decreases when the advance is made, and a corresponding Misc. Asset appears.
The shareholder receives the intended cash amount.
The corporate asset is reduced or eliminated when repayment occurs.
Corporate cash increases when the asset is sold.
Important limitations
This workaround models the cash movement but does not establish a formal loan relationship between the shareholder and the corporation.
In particular, Planworth does not automatically:
Track an outstanding personal loan balance for the advance.
Record a personal loan liability.
Link the personal repayment to the corporate asset.
Calculate interest or enforce a repayment schedule.
The corporate loan receivable is represented by a Misc. Asset rather than a dedicated shareholder loan account.
As a result, the shareholder's personal and consolidated net worth may differ from a model that explicitly records the loan liability.