A promissory note is a written agreement in which the maker promises to pay a creditor, or to the order of a creditor, the amount of a debt, usually with interest. Contract formalities should be followed to ensure the enforceability of the note. A promissory note may be a negotiable instrument if the requirements for such an instrument are present on the face of the note.

The attached file contains a sample unsecured promissory note that can be customized to document a loan to you from a family member, friend, or other private party. The form is designed to help prove that you have established a formal debtor/creditor relationship and that the exchange of money is a loan, not a gift. Executing a promissory note and adhering to its terms will help reduce the risks from gift tax issues, conflicts of interest and mismanagement claims, and personal misunderstandings between insiders and entrepreneurs.

Within this section of Business Tools, we reproduce a number of contracts and forms that are useful in forming and operating a business with a maximum level of asset protection. From the earliest agreement to start a company to ways to remove valuable assets from a growing business, these forms cover the most popular strategies and gives clues as to how best to structure your operation. Equipment leases and various financing arrangements are also covered, allowing you the greatest protections under the law.

After considering their personal resources, the next place most entrepreneurs look for additional financing is to "insiders" like family, friends, or business associates. Borrowing from insiders is attractive because it's private, often informal, usually unsecured, and often includes favorable terms, and because legal default proceedings are seldom invoked. In addition, this kind of financing can often be incorporated into a family's estate plan to assist in minimizing estate and income tax liabilities.

One recommended asset protection strategy involves using an operating/holding company business structure. Then, liens are used to secure any extension of credit from the owner or holding company to the operating company.

One recommended asset protection strategy involves using an operating/holding company business structure. Then, liens are used to secure any extension of credit from the owner or holding company to the operating company.

"Gross income from sales" includes business income that you receive from sales to your customers. You should only report income you received within your tax year according to your established accounting method.

When the homestead exemption is limited and the value of the home exceeds the exemption, this strategy should be employed: Keep the home encumbered with first or second mortgages. The amount of consensual liens (and other non-removable liens) on the property should always equal or exceed the difference between the value of the home and the exemption amount.

The undercapitalization theory is one of two ways a court can pierce the veil of limited liability that protects an owner from liability for the business's debts.

Here you'll find ready-to-use business tools to help you get the job done faster and easier, including: