Startup/purchasing questions

[Odds-on-Sod]

I'll be establishing an LLC at the end of 2003. I planned to start in the business this year, but for pleasant reasons had to postpone it until 2004.

I needed to buy a new mower for my yard and so yesterday I bought a new Toro 21" commercial (2-cycle Suzuki) figuring I'll use it in the business next year. I have a couple of questions that I hope someone in the forum can clear up for me. At some point prior to startup I'll be talking to a lawyer and CPA, but just for the hell of it:

For accounting/insurance/legal purposes will I be able to "transfer" ownership of such equipment to the LLC? Should I be waiting until the business is established to buy any equipment (with the idea of maintaining separate personal/business accounts and records)? Is a $900 trim mower depreciated in the same way as a multi-thousand dollar 48" mower? Is it likely that purchasing a piece of equipment as an individual (rather than as a business) that is later used in the business would expose you to any personal liability merely because it wasn't purchased under the business.

Thanks for your help on these.

--Mike

[Phil Nilsson]

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For accounting/insurance/legal purposes will I be able to "transfer" ownership of such equipment to the LLC? <b><font color="red">YES</font id="red"></b>

Should I be waiting until the business is established to buy any equipment (with the idea of maintaining separate personal/business accounts and records)? <b><font color="red">NO</font id="red"></b>

Is a $900 trim mower depreciated in the same way as a multi-thousand dollar 48" mower? <b><font color="red">YES </font id="red"></b>

Is it likely that purchasing a piece of equipment as an individual (rather than as a business) that is later used in the business would expose you to any personal liability merely because it wasn't purchased under the business.<font color="red"><b>NO</b></font id="red">

[Scaper-S2k]

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Phil wrapped it up pretty good. I will say that the depreciating portion of the question can be viewed differently. Phil is correct, however, it can be done differently. You may consider deducting all of the smaller equipment with immediate right-offs through the beautiful 'Section 179'. Most things under $3k we used to throw into that section for the IRS.

If you REALLY wanted to do it by the books on the ownership of that mower, you would simply cut a biz cheack to yourself for $900 for the mower. That way the biz bought it from you. Easy way to transfer the equipment, even though in the end on the LLC or S-Corp, profit flows through to you anyway.

Good luck.

[Maddog]

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I also had this question when starting up. The accountant that I use advised me to depreciate the high dollar items like the ZTR's and to write off the lower dollar items like the push mowers and string trimmers.

About transferring the equipment he basically said the same thing as Scaper did. The accountant said it would be easier to track though, if your business bought your homeowner equipment by writing yourself a check from the business.

Although I have only been in the lawn business for just over 3 years I found that it is much easier to do your accounting if you keep your business and personal separated.