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Renting from myself!??!

Discussion in 'Starting a Lawn Care Business' started by anchormenrugby, Aug 20, 2007.

  1. anchormenrugby

    anchormenrugby LawnSite Member
    Posts: 5

    I would like opinions on this possible scenario:

    I plan on forming my Lawn Care venture under the LLC format in the state of R.I. This would be a new venture with no capital upfront other than my personal credit. Obviously, I would not be able to get credit based upon the company since it has no history, so I am thinking of using my credit to purchase the equipment I need. So here is the hitch, I won't be able to transfer my (future) truck and lawn mower into the company's name until I had complete ownership of it once it is paid off, but I am thinking about renting the equipment from my person to the company. The reason I would do this is to remove all (minimize) liability from me, the individual, to the company in case of any situation that would lead to a lawsuit.

    So what do people out there think? Is this feasible, smart, is there something better I could do?
  2. grandview (2006)

    grandview (2006) LawnSite Gold Member
    Posts: 3,466

    A good account should be able to set that up for you.
  3. anchormenrugby

    anchormenrugby LawnSite Member
    Posts: 5

    sorry, do you mean accountant?
  4. Grits

    Grits LawnSite Silver Member
    from Florida
    Posts: 2,994

    yes, he does.
  5. BubbaD

    BubbaD LawnSite Member
    Posts: 11

    Property transferred into an LLC is generally tax free, unless the liability on the property exceeds the basis. Property is transferred at the basis held by the partner, or in other words, at a carryover basis.

    Single member LLC's are taxed as a proprietorship and referred to as a "disregarded entity", unless you elect to be taxed as a corporation. More than one, LLC's are taxed as a partnership, unless you elect to be taxed as a corporation. LLC's must follow the rules for the entity they are being tax at.

    Single member LLC's, default to file a Schedule C, or Schedule E (if renting real estate, NOTE-Equipment rentals do not go on Schedule E, but are consider personal property rentals), unless you elect to be taxed as a corporation. Multiple member LLC's file a partnership tax return, unless you elect to be taxed as a corporation.

    LLC's, or any other entity, will protect you against the torts of your employees. It will not protect you against the torts you commit, so if you are a one man show, and LLC will not protect you. In my experience, most taxpayers do not maintain entities according to the rules (dotting I's and crossing T's) so your entity will not protect you if you are sued.

    LLC's also have state filing and state tax income or franchise taxes.
  6. echeandia

    echeandia LawnSite Bronze Member
    Posts: 1,131

    Your assumption here is false. The company can qualify for credit with your personal guarantee. It's done all the time.

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