Equipment Depreciation

Discussion in 'Lawn Mowing' started by south jerz, Mar 28, 2005.

  1. south jerz

    south jerz LawnSite Member
    Posts: 87

    Hey All,

    Me and my partner had a third guy this year who won't be able to work with us this summer and to prevent any future complications we are going to pay him everything he put into the business. Because he won't be around at all he can't really object to this, my question is:

    In terms of stuff purchased between the three of us we have about $4200 worth of new equipment (500 Blower, 260 Weedwacker, 340 Edger, 5x8 Trailer and Hitch 900, 2200 36" Mower, all high quality brands). The equipment is one year old and all has about 240 hours logged on it. Since the equipment is now significantly used and he made a good amount of money off of it last year, we don't think he should receive the brand new value $1400 (1/3 share of $4200) of the equipment. Based on those figures, what kind of deal would you negotiate here? I was thinking no more than $1000 or 1100. Any thoughts?
     
  2. wally world III

    wally world III LawnSite Member
    Posts: 128

    let your CPA handle it ..................
     
  3. bigz1001

    bigz1001 LawnSite Member
    Posts: 128

    About a worthless answer since he is 19. My suggestion would be to look at used equipment prices and base it from there.
     
  4. LB1234

    LB1234 LawnSite Gold Member
    Posts: 3,210

    This should have been negotiated BEFORE the business was set-up...you know things like if this partner shall leave due to death, another job, etc. what happens. But hey, live and learn....make sure you have something in writing with your current partner and have your attorney review it.

    As for 'depreciation' as others have suggested you will need to speak with your accountant. Some of the lower purchase priced equipment can be written off immediately...so there is immediate depreciation...at least for some of our smaller purchases that is the case (backpack blowers, trimmers, etc.)...I think...I have to double check. Some of your higher ticket items (i.e. mowers) can be depreciated in two different ways...we used straight line...something like over 7 years or something...I might be off a little with what I'm saying...again need to check.

    Personally, assuming he left on good terms, I would provide him with fair market value of what he brought in last year. just an opinion.
     
  5. Appalachian landscape

    Appalachian landscape LawnSite Senior Member
    Posts: 453

    $700 is probably fair.
     
  6. Richard L.

    Richard L. LawnSite Member
    Posts: 6

    Hey All,

    Try putting yourself in your "third" partner's shoes. If it was you, how much do you feel you should be entitled to? Although he worked with some equipment in the past and made money, good for him. You could have done the same thing. Equipment depreciates a set amount each year even if it's used or left in a shed.
    I'm not trying to take sides. All best wishes. RL
     
  7. Lowe Mowing

    Lowe Mowing LawnSite Member
    Posts: 46

    800-900 would be fair. Don't try scamming him for money that he should be getting but one the other hand, you dont wanna be losing money.
     
  8. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    you are not talking about depreciation at all. what you are talking about is a buy out. and rightfully, he is entitled to 1/3 (or whatever portion of capital he contributed) of the businesses value, not just equipment value.
     
  9. lawnlubber

    lawnlubber LawnSite Member
    Posts: 186

    What he said.
    Your partner must have invested unpaid time to help build the business. If you are buying him out he needs to be compensated for that.
    1/3 of used equipment cost + 1/3 of cusomer base x $100 might do it.
     
  10. PMLAWN

    PMLAWN LawnSite Gold Member
    Posts: 3,535

    My guess is that the equipment is worth about 1/2 of what it was new, so give or take about $700. But as Mac said there is value to the business that you need to address.
     

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