How Do I Determine Value When Leasing "my" Computer To My LLC?
I have a newly formed LLC and I've been told that I should lease my computer, printer, desk, etc to my LLC. How do I determine value or payments for this lease? And since I do not have a steady income yet, I can just write on my form that $X amount of dollars is due out of each deal I do? Do I need to create a bill in addition to a signed contract? Please help!
Thanks,
Ginnie
Hey,
I have seen people "give" their children computers, desks, etc as gifts and then lease them back to themselves or their company. The children do not have to pay taxes on x amount of dollars each year earned. The money could then be used for college (as an example).
I am not sure of the tax advantage to leasing a computer to your LLC. You would have to declare the lease payment on your 1040. Am I missing something?
As far as the value, you should use the current price (for whatever your system specs) on the market.
As far as billing, charge the LLC each month. If they can not pay, they enter it as a Payable and you enter as a Receivable.
My thoughts on leasing the equipment from myself to my llc. This goes along with taking the deduction for a home office idea. The amounts you are able to deduct are VERY small, and when you start leasing stuff back to yourself, it sets off VERY large flags with the IRS, and increases the odds of an audit exponentially. If you're all covered, got everything buttoned down, and don't mind the occasion audit, then by ALL means, go ahead and do it. However, in my case, I'll forgo the $200.00 a year, (or whatever it is) and not take the deductions, so I decrease the odds of an audit.
First, I'd ask the advice of a good accountant. One option that I'd question them about is expensing it, rather than leasing it. That was what was recommended to me by my accountant, but that was several years ago. You should be doing expense reports anyway to document any expenses that come out of your pocket (toll roads, mileage, etc). Just add personal computer use to those expenses. As for the dollar amount, call up a local business supply place that rents them (they DO do that, construction sites especially only need them for a month here or there so they rent instead of buying). Charge whatever the going rate is, unless you use the computer for personal use as well, then prorate appropriately. But again, run this option by your accountant and see which way he recommends. My current business owns all its PCs so I haven't had to ask lately.
Ginnie--
Worry less about these details and more about finding a deal. When you are first starting out in the business it is easy to get all tied up in the details: How do I treat the PC? Do I get a Postal meter? Do I use signs or cards? None of this matters. In fact, at your stage in the process they are ways of avoiding the real work of the business by staying inside your comfort zone. It is much easier to think about accounting for your time or some detail of the business than it is to go do a deal-- but only doin a deal will keep you in the busines.
So, if you want to keep track of something keep track of how many new contacts you have made in a week. Set a goal of 25 or 50 and make that mean 5 or 10 a day for the weekdays. That means that every day you need to talk to 5 new people-- ones you have talked to before don't count-- about what you do, what they are looking for, what they have to sell, what they want to buy.
If you do that, and use your PC to keep track of the results so that when you find a deal you will know who's looking for that deal then you will not have to worry about how to charge back the rental on the PC-- because you will be making enough money that such things will be trivial.
thank you commercialtalking, you are SO right!
Ginnie