Gift, Loan, or Investment? How to Give Money to a Family Member's Business

Decide before the money moves. A gift is never paid back and needs no paperwork up to $19,000 per person in 2026. A loan must be repaid, should be written down, and above $10,000 should charge at least the IRS Applicable Federal Rate. An investment buys a share of the business and can trigger securities rules.

Your sister is finally opening her nail studio. Your cousin has a food truck lined up and needs a few thousand dollars for the wrap and the first inventory run. You want to help, and you have the money. The question that trips most families up is not how much, but what kind of money it is. A gift, a loan and an investment feel similar when you hand over the check. They are very different a year later, when the business is slow, or booming, and nobody wrote anything down. Here's how each one works, what the IRS cares about, and how to pick.

What's the difference between a gift, a loan and an investment?

The difference is what you expect back.

• A gift expects nothing back: no repayment, no product, no share of the business. It's support, full stop.
• A loan expects the money back, usually with interest, on a schedule you both agree to.
• An investment expects a piece of the upside: ownership (equity), a share of profits, or a right to convert into ownership later. You also share the downside, and you can lose all of it.

Is it better to gift or loan money to a family member?

If you can afford to let the money go, a gift is usually simpler and kinder. There is no repayment to chase, no awkward holiday dinner when a payment is late, and no tax paperwork at all for most amounts. In 2026 you can give any one person up to $19,000 without filing anything (see our gift tax limit 2026 guide for the full rules). Even above that, you just file Form 709 and the amount counts toward a lifetime exemption of $15,000,000; no tax is due until you pass it.

A loan makes sense when you'll actually need the money back, or when the amount is big enough that it would change your own plans if it disappeared. Just be honest with yourself: if you'd never really ask for repayment, call it a gift.

Do I need to charge interest on a family loan?

For small loans, generally no. The tax code has a $10,000 de minimis exception for gift loans directly between individuals (26 U.S.C. § 7872). That exception doesn't apply when the loan is directly used to buy or carry income-producing assets, which can include business equipment, so ask a tax pro if your loan funds the business itself.

For loans over $10,000, charge at least the Applicable Federal Rate. The IRS publishes these minimum rates every month on its Applicable Federal Rates page; use the rate for the month the loan is made and the loan's term (short, mid or long). If you charge less, the IRS can treat the missing interest as if you received it and then gave it away, which creates income for you and a gift on paper.

Two more things to know: the interest you receive is taxable income for you, and if you later forgive the loan, the forgiven amount is generally treated as a gift in the year you forgive it.

What should a family loan agreement include?

A simple promissory note protects the relationship as much as the money. Include:

1. The amount, the date and both names.
2. The interest rate (at least the AFR if over $10,000).
3. The repayment schedule: monthly amount, start date, end date.
4. What happens if a payment is late or the business closes.
5. Signatures from both of you. Keep a record of every payment.

What if I want a share of the business instead?

Then you're an investor, and the rules change. Under federal securities law, every offer and sale of securities, even to just one person, must be registered with the SEC or fall under an exemption, and that includes friends and family (SEC: Private Companies and the SEC). Most small family deals use an exemption, but the business owner should set it up properly, usually with a lawyer and an operating agreement that spells out your percentage, voting rights and what happens if the business is sold or closes.

Investing can be a great fit for a relative who brings real money and wants real upside.

Where does Giftabiz fit?

Giftabiz lives entirely in the gift column. Every contribution is a gift: no equity, no rewards, no repayment and no promised return. Under the Terms of Service, givers pay a 5% platform fee plus card processing on top of their gift, gifts go straight to the owner's Stripe Connect account, and Giftabiz never holds the money. The owner keeps 100% of the gift.

That makes it a clean way to give: the gift is clearly labeled as a gift, and you can add a video message that doubles as a record. Business owners don't need an LLC to receive gifts; sole proprietors and DBAs are welcome under the community guidelines. If you're wondering how this looks on the owner's side, our guide on whether gifted money is taxable explains why a genuine gift isn't income for the person receiving it. And if you're comparing ways to send support, see Giftabiz vs. GoFundMe. Founders on the other side of this conversation can read how to ask friends and family to fund your business.

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This guide is general information, not tax or legal advice. Tax and securities rules depend on your situation; talk to a tax professional or attorney before making decisions.