Financing your launch with love money: structuring money from family and friends

Quick answer. Love money is the money your circle puts in at the very start. It takes three forms: a loan, a gift or an equity stake. Each has its own rules. A loan exceeding 5,000 euros must be declared on form 2062; a family gift benefits from a 100,000-euro allowance per parent and per child every 15 years; an equity stake grants shares and rights. The main risk is not tax, it is relational: a written framework protects both the project and the family.

In most of the company-formation files we handle, the first euro invested comes neither from a bank nor from a fund, but from a parent, a sibling or a friend. This love money is precious: it funds the phase when no professional player will yet take the risk. It is also the most poorly documented source of capital. A transfer received without a contract, a vague "we will sort it out later" on repayment, an oral promise of shares: these grey areas are what, two years on, turn a family dinner into a dispute and a tax audit into an unpleasant surprise.

This article is not a definition of love money. It is a practical guide to structuring money from your circle without harming either the project or the relationships. We cover the three possible forms, their tax consequences, the documents to produce and the mistakes we see most often.

The question every founder asks is "how will this money be taxed?". That is the wrong starting point. The first decision is economic and relational: what does the person giving you money actually expect?

Three intentions, three structures.

• The loan. Your relative wants their money back, with or without interest. The money enters your estate or the company's accounts as a debt. It must be repaid on a schedule. It is the most tax-neutral form and the clearest one for preserving a relationship: everyone knows what is owed.
• The gift. Your relative expects nothing back. The money is yours for good. It is generous, but it falls under gift-tax rules and family considerations (notably equality between heirs) that must be anticipated.
• The equity stake. Your relative wants a share of the project and its success. They become a shareholder, receive securities, vote at meetings and may receive dividends. It is the most binding form, and the riskiest if poorly allocated.

Our view: most conflicts arise from a misunderstanding about intention. The person believed they were lending, you thought you had received a gift; or they expected shares you never planned to grant. Before discussing amounts, put the expectation into words. To frame this upstream, our accompaniment in setting up your company systematically addresses the question of start-up funding.

The loan is the simplest route, but it carries a precise reporting obligation.

A loan between individuals exceeding 5,000 euros must be declared to the tax authorities on form 2062, pursuant to the order of 23 September 2020 (article 49 B of annex III to the French General Tax Code). Mind the boundary: the exemption threshold is set at 5,000 euros, which means a loan of exactly 5,000 euros is not subject to declaration; the obligation applies only strictly above that amount. The declaration is filed with your income tax return, by the borrower (or the lender). It is not a trivial formality: it dates the loan, it proves the money is a debt and not a disguised gift, and it protects both parties in the event of an audit.

In practice, we always recommend going beyond the legal minimum and formalising a written loan agreement, even below 5,000 euros. This document sets out:

• the identity of the lender and the borrower;
• the amount lent and the date it was made available;
• the interest rate (which may be zero between relatives);
• the repayment schedule and the maturity date;
• the consequences of a payment default.

The underestimated risk lies in repayment. Many founders sign a loan "in principle" and never provision the instalments in their forecast. When cash tightens, the family debt comes after everything else, and that is where tension appears. A structured loan must appear in your cash-flow plan just like a bank loan.

When your relative expects no repayment, the right tool is a gift. The taxation of family gifts is more favourable than many founders assume.

A cash gift from a parent to a child benefits from an allowance of 100,000 euros per parent and per child, renewable every 15 years (article 779 I of the French General Tax Code). In practice, two parents can pass on 200,000 euros to a child free of gift tax, and this ceiling resets every 15 years.

On top of this allowance, for cash gifts, a specific exemption provided by article 790 G of the French General Tax Code applies, capped at 31,865 euros, subject to conditions: the donor must be under 80 and the recipient must be of age. This exemption is cumulative with the 100,000-euro allowance.

A manual gift must be declared on form 2735, which fixes its date and value. Failing to declare a gift leaves an uncertainty hanging that can prove costly at the time of an inheritance.

The point to watch is not tax, it is family. A substantial gift to an entrepreneur child can create an imbalance with siblings when the estate is settled. This is a matter of wealth and notarial advice, which we handle alongside our advisory on corporate and director taxation when the project and the director's estate are intertwined.

The third route is to bring your relative into the company's capital. They contribute money and receive securities in return: shares in an SAS, units in an SARL.

It is the most binding form, because it cannot be unwound by a simple repayment. Your relative becomes a shareholder: they have voting rights, information rights and a right to dividends. If the company thrives, they benefit; if it fails, they lose their stake, like any investor.

Two mistakes recur constantly in friends-and-family seed files.

1. Overvaluing the company to limit dilution, or undervaluing it out of affection. Bringing a relative in at a complacent valuation distorts the cap table from the outset and complicates the next round. Our dilution and cap table simulator lets you visualise the impact of a contribution on the share split before signing.
2. Granting too many shares to a passive relative. A friend who contributes 10,000 euros but claims 25% of the capital deprives the founder of the room needed to take on partners later, recruit with share warrants or open a genuine fundraising round. The initial split shapes the entire future: we detail the traps in splitting the capital between partners without mistakes.

The choice of structure also matters: a later transfer of SARL units bears a 3% registration duty (after an allowance), against 0.1% for SAS shares (article 726 of the French General Tax Code). For a project likely to evolve, this parameter should be weighed from the outset. Our legal-form selection simulator helps you frame this first trade-off.

There is no universal right answer, but a decision grid based on intention and context.

Our recurring advice: do not mix genres within a single flow. A transfer that is "half gift, half loan" is unmanageable legally and fiscally. Separate the contributions, document each one, and keep a clear record of who contributed what, in what form and on what date.

One pattern often recurs in first-year files. A founder receives, over a few months, several transfers from relatives: 8,000 euros from a parent, 5,000 euros from an uncle, 3,000 euros from a friend, with no contract or declaration. The company is created, the money funds inventory and the first salaries.

Two years later, the project works. The friend now feels they "invested" and claims shares. The uncle expects his repayment. The parent considers it was a gift. No one wrote down the rule, and each has their own version. The cost of putting things right, in time and fees, far exceeds what an initial framing of a few hours would have cost.

The lesson is simple: love money is documented at the moment it is given, not when it becomes a problem. To go further on the interplay between love money and professional investors, see our analysis on structuring a first round with business angels and, more broadly, on building a funding mix at launch.

Here is the sequence we apply in formation files, in order.

1. Define the round. Set the total amount sought, what it will fund and how much each relative contributes. A love money round is sized to a real need, not to what the family is willing to give.
2. Qualify each contribution. For each person, decide: loan, gift or equity? Put the intention in writing before any transfer.
3. Document. Loan agreement for loans, gift declaration (2735) for gifts, subscription form and updated articles of association for equity stakes.
4. Declare. Form 2062 for a loan exceeding 5,000 euros, form 2735 for a gift, registration formalities for an equity stake.
5. Track. Keep a love money table (who, how much, in what form, instalments) and build any repayments into your cash-flow plan.

This framing work is at the heart of our support for startups and our engagement to secure the legal framework of your friends-and-family round.

Love money is rarely a complex tax topic. The thresholds are known, the tools exist, the 100,000-euro allowance covers most family gifts at launch. The real issue lies elsewhere: clarity. The files that go wrong are never the ones where the tax was miscalculated, they are the ones where no one wrote down the starting intention.

So we stress one simple principle: treat your relatives as serious investors. A professional investor would never put in a euro without a contract; the rigour you apply to family is the best proof of respect you can offer. A written framework does not chill the relationship, it protects it.

Finally, keep in mind that love money is only one building block. It funds the seed phase, but it must fit into a path where, depending on the project, the bank loan, public grants or a genuine fundraising round will follow. Anticipating what comes next from the first round avoids being blocked later by a poorly split cap table.

Limitation. This article informs on general principles current as of spring 2026. The treatment of a gift, a loan or an equity stake depends on your situation, your articles of association and your estate. A precise decision requires a review of your file and, where relevant, the involvement of a notary for the inheritance aspect.