'Selling' equipment to your own business... (1 Viewer)

mr roboto · Oct 20, 2014

This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

parasaurolophus · Oct 20, 2014

mr roboto said:
This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

assets. i dont think there would be anything wrong with it, but I only stayed at a holiday inn express friday

Bri · Oct 20, 2014

mr roboto said:
This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

Do you have receipts?

In the least, I would work up a spreadsheet with amortization figures.

mr roboto · Oct 20, 2014

Bri said:
mr roboto said:

This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

Click to expand...

Do you have receipts?In the least, I would work up a spreadsheet with amortization figures.

Yes. I have receipts for the tools purchased new and could find comps for used values.

Bri · Oct 20, 2014

mr roboto said:
Bri said:

mr roboto said:

This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

Click to expand...

Do you have receipts?In the least, I would work up a spreadsheet with amortization figures.

Click to expand...

Yes. I have receipts for the tools purchased new and could find comps for used values.

You could just use this http://www.calculatorsoup.com/calculators/financial/depreciation-sum-of-years.php

Fat Nick · Oct 21, 2014

mr roboto said:
This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

Yes. You can. The benefit (aside from assets) is that you're creating an expense for your business. This expense reduces your earnings, and means you have less "profit" to pay taxes on. But in reality, you paid yourself for the items.

You would have to depreciate the assets over time (i.e. you don't take the whole expense hit at once, but over the useful life of the asset).

I "sold" my car to my small business when I had it and wrote off the mileage and the car/depreciation as a business expense.

jon_mx · Oct 21, 2014

Fat Nick said:
mr roboto said:

This is a bit of a weird question, but hang with me. Say you have a hobby doing woodworking. You have nice woodworking tools and want to start a business. You incorporate and decide to buy equipment from yourself. Say you have $10,000 (in new pricing) in saws, lathes, drills etc. Can your business entity 'buy' those tools for whatever a used fair market value is? Would there be any advantages in doing so? Would that be an expense or asset in the books of the business? Would it look funny to buy your own tools from yourself into a company fully owned by yourself?

Click to expand...

Yes. You can. The benefit (aside from assets) is that you're creating an expense for your business. This expense reduces your earnings, and means you have less "profit" to pay taxes on. But in reality, you paid yourself for the items.

You would have to depreciate the assets over time (i.e. you don't take the whole expense hit at once, but over the useful life of the asset).

I "sold" my car to my small business when I had it and wrote off the mileage and the car/depreciation as a business expense.

He could probably write it off under section 179 in year one. But he should avoid the use of the word Hobby and call it a Business. Hobby's are not allowed to have losses for tax purposes. If you have a true profit motive it can be considered a business.

eoMMan · Oct 21, 2014

Will you be reporting the sale on your personal return?

What type of entity is the business?

arrow1 · Oct 21, 2014

eoMMan said:
Will you be reporting the sale on your personal return?

What type of entity is the business?

Sounds like a deli

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