A loan between my two LLCs: the note, the interest rate and the entries

You can lend money between two LLCs you own if you treat it as a real loan. Sign a written promissory note with the amount, interest rate, payment dates and due date. Where the below-market loan rules apply, charge at least the IRS applicable federal rate: 4.18% in September 2026 and 4.25% in October for loans of 3 years or less. Record a note receivable in the lender and a note payable in the borrower.

Updated September 30, 2026 · 6 min read · By the Accountable team

The short version

Whether the IRS sees a loan depends on how each LLC is taxed: two single-member LLCs with the same owner are treated as parts of that owner.
A written note should state the amount, the interest rate, the payment schedule, the due date and who signs for each LLC.
The applicable federal rate for a loan of 3 years or less is 4.18% for September 2026 and 4.25% for October 2026.
The lender records a note receivable and interest income, and the borrower records a note payable and interest expense, on the same dates.
Pay on schedule, use separate bank accounts and match the two sides every month, so the loan stays believable.

First check how each LLC is taxed, because that decides whether the IRS sees a loan

An LLC has no tax status of its own. By default, an LLC with one member is disregarded as separate from its owner, and an LLC with two or more members is a partnership, unless it files Form 8832 to be taxed as a corporation. The regulation says a disregarded entity is treated like a branch or division of its owner for income tax, except for employment and excise taxes.

How the IRS treats a loan between LLCs, by how each is taxed
Situation	How the IRS sees it	What to do
Both LLCs are single-member and owned by the same person or company	Both are branches of one owner, so money between them is generally not a loan between two taxpayers	Skip the tax reporting, but keep the note and the books for liability and clarity
One or both LLCs are taxed as a partnership	A loan between separate taxpayers	The lender reports interest income and the borrower may deduct interest, so the rate matters
An LLC taxed as a corporation lends to or borrows from its owner	A corporation-shareholder loan, a category the below-market loan rules cover	Charge at least the applicable federal rate

This is general information, not tax advice. Your CPA should confirm how your LLCs are classified before you choose a rate.

Write the note with seven terms and have each LLC sign it

Step 1: Name the lender LLC and the borrower LLC and date the note.
Step 2: State the principal, for example $60,000.
Step 3: State a fixed interest rate, at or above the applicable federal rate for the loan's term, and how interest is counted.
Step 4: State the payment schedule: interest monthly and principal at the end, or equal payments.
Step 5: State the due date, for example 36 months from the loan date.
Step 6: State what happens on a missed payment, and whether the borrower can prepay.
Step 7: Have an authorized person sign for each LLC and show the capacity. If one person runs both, they sign twice, once for each LLC.

Move the money by bank transfer from the lender's own account to the borrower's own account, and put the note's date in the memo. StartSmart Counsel lists commingled bank accounts, no written documentation and no separate accounting as facts that can cause a court to ignore a structure.

The applicable federal rate is the floor where the below-market loan rules apply

The IRS publishes applicable federal rates, or AFRs, every month in a revenue ruling. Section 7872 treats a loan charging less than the AFR as a below-market loan in these cases: gift loans, compensation-related loans, corporation-shareholder loans, tax avoidance loans and other loans with a significant tax effect on either party. Term loans use the AFR for the loan's term, and demand loans use the federal short-term rate. Loans of $10,000 or less are exempt in some of those categories, unless avoiding tax is a principal purpose.

The term decides the rate, from section 1274(d): short-term is a term of 3 years or less, mid-term is over 3 and up to 9 years, and long-term is over 9 years.

Applicable federal rates, annual compounding
Loan term	September 2026 (Rev. Rul. 2026-17)	October 2026 (Rev. Rul. 2026-19)
3 years or less (short-term)	4.18%	4.25%
Over 3 to 9 years (mid-term)	4.49%	4.61%
Over 9 years (long-term)	5.12%	5.22%

Write the rate in the note on the day you sign, and check the current month's ruling, because the IRS changes the rates monthly. If a below-market loan charged 0% and section 7872 applied to a $60,000 demand loan, the forgone interest would be about $2,500 a year at the short-term rate, treated as paid by the borrower to the lender and taxable to the lender.

A $60,000 loan at 4.25% for 36 months, entry by entry

Sunrise LLC lends Harbor LLC $60,000 on October 1, 2026 for 36 months at 4.25%, interest paid monthly and principal due at the end. One year later Harbor prepays $20,000. Monthly interest on $60,000 is $60,000 × 4.25% ÷ 12 = $212.50.

Journal entries for both LLCs on a $60,000 intercompany loan
Date and event	Lender (Sunrise LLC)	Borrower (Harbor LLC)
Oct 1, 2026: loan made	Debit note receivable, Harbor $60,000; credit cash $60,000	Debit cash $60,000; credit note payable, Sunrise $60,000
Oct 31, 2026: one month of interest	Debit interest receivable $212.50; credit interest income $212.50	Debit interest expense $212.50; credit interest payable $212.50
Nov 5, 2026: Harbor pays the interest	Debit cash $212.50; credit interest receivable $212.50	Debit interest payable $212.50; credit cash $212.50
Oct 1, 2027: Harbor prepays $20,000	Debit cash $20,000; credit note receivable, Harbor $20,000	Debit note payable, Sunrise $20,000; credit cash $20,000
Oct 31, 2027: interest on $40,000 remaining	Debit interest receivable $141.67; credit interest income $141.67	Debit interest expense $141.67; credit interest payable $141.67

After the prepayment, the note is $40,000 on both sides, and monthly interest is $40,000 × 4.25% ÷ 12 = $141.67. If you consolidate, the note and the interest are eliminated (how to consolidate financial statements).

Keep the loan believable: pay on schedule and match the books every month

Pay interest on the dates in the note. If you skip or change a payment, sign a short written amendment.
Do not forgive the loan informally. Forgiveness has tax consequences, so ask your CPA first.
Keep a separate bank account for each LLC, and move loan money only between them.
Match the sides every month: the lender's note receivable plus interest receivable must equal the borrower's note payable plus interest payable.
Record both sides on the same day, as described in intercompany transactions accounting.

Questions founders ask

Can one LLC lend money to another LLC?

Yes. Treat it as a real loan with a signed note, a stated interest rate, a repayment schedule and entries in both LLCs' books.

Do I have to charge interest on a loan between my LLCs?

If both are single-member LLCs with the same owner, the IRS generally treats them as one owner, so there is no interest income or deduction to report. If either is taxed as a partnership or corporation, charge at least the applicable federal rate. Ask your CPA.

What is the applicable federal rate in 2026?

For loans of 3 years or less, 4.18% annual for September 2026 and 4.25% for October 2026. For loans over 3 and up to 9 years it is 4.49% and 4.61%, and over 9 years 5.12% and 5.22%.

What if I loan money between LLCs with no paperwork?

You lose the evidence that it was a loan. The books may show an unexplained balance, and an IRS or court review can treat it as a contribution or a distribution. Sign a note now, dated when you actually sign it, and record the history accurately.

How do I record a loan between two LLCs?

The lender debits note receivable and credits cash. The borrower debits cash and credits note payable. Each month, the lender records interest income and the borrower records interest expense.

Loans post on both sides, interest included

In Accountable, set up a loan between two of your companies once with its rate. Interest posts in both companies on the last day of each month, and a repayment found in both banks matches on both sides with one click. The Intercompany tab shows any month where the two sides differ.

See multi-entity accounting

Sources, checked September 30, 2026: