Discussion in 'Business Operations' started by yardboyltd, Feb 7, 2003.

  1. yardboyltd

    yardboyltd LawnSite Senior Member
    Messages: 323

    My original question was in three parts, with a implication of no professional, two of which I answered shortly one after. I simply wanted advice on "part one". However, I thank you for your thoughtful contributions. Yes I do believe professionals are great for people who want to use them. I prefer not to depend on them. A lawyer had already suggested LLC for me. I do have an "accountant", in fact I provide computer services for her parttime like designing databases, modifiying spreadsheet designs, etc.. She offered last year to do my taxes for free, but I still payed her what it would have cost in software, but nowhere in regular accountant fees. I don't depend on her much though, just use her creativity in deductions and keep me straight. I like to understand things for myself, thats not an inhuman feat.

    Paponte, I didn't ask anyone advice on whether I should get an accountant or not, so I'm not "guilty" of asking a question and not "heading" it. I rather asked if anyone knew how the values of stocks etc... was calculated. No one answered to that question. Theres alot of smart people on these forums with expierence in such matters. If they could tell me, why shouldn't I ask instead of an accounant who may not be completely familiar with calculating the value of uncommon assests like lawnmowers, mowing agreements.. Not saying they couldn't, but always nice to hear the advice of people who the industry first.

    If you prefer to farm out accounting because you don't like it, don't have time for it, don't get it... that's alright. That doesn't mean it's the right thing for everyone though. The accounting doesn't bother me; I like it... Its my own personal conclusion after lots of thinking that a full time accountant wouldn't save me any more time or money. Thats in my situation though, remeber.

    Anyways, for many unstated reasons, LLC is my chosen business structure. Thanks.
  2. dougaustreim

    dougaustreim LawnSite Senior Member
    Messages: 488

    You are correct in that no one addressed your initial question. I guess the answer most people were giving you is to have an accoutant or lawyer do it. When we went throught the process with the assistance of both of the above professionals, we simplly listed all of the assests that the corporation would initially own and set a value for them. Rather arbitrary with no outside appraisal or anything since it was all in house transaction. They then picked a rounded number of shares to be the initial group. The net value of the assetts at that time was almost 300,000. The charter authorizes the corporation to issue up to 5000 shares with a par value of 100.00 each. They actually only had us issue 2000.

    From what I can tell, these numbers were quite arbitrary. Like any other stock, the value can go up or down as conditions change.

    I still think you should have an attorney do the actual paper work, but thats my opinion.

    Austreim Landscaping
  3. bruces

    bruces LawnSite Senior Member
    Messages: 648

    When valuing assets put in to a business, if you are transferring assets from an individual to a corporation in a "tax free transaction" (exchange the assets for stock in the corporation) the assets are valued at your tax basis.

    In other words, if you bought the assets for 10,000 and you have deducted depreciation in prior years of 6,000, you would have a value of 4,000 in the corporation. Whatever "par value" you place on the shares would not really matter, your tax basis will still be 4,000.

    If you decided the value was higher (say 7,000) and want to transfer the assets at that figures, you would have a taxable gain of $3,000 and pay tax on that on your personal return.

    If you are simply going from a sole proprietorship to a one person LLC, you are still taxed as a proprietorship (unless you elect to be taxed as a corporation). In that case, the basis of the assets does not change, as you have not really changed the tax status of your business, and the values are irrelevant, the only thing that matters is the "tax basis" (cost less depreciation taken).
  4. yardboyltd

    yardboyltd LawnSite Senior Member
    Messages: 323

    Thanks guys, that's what I was look'n for. One of the reasons I decided to go with LLC is because I don't have to issue shares and I'm given alot more flexibility in changing assests over in my Operating Agreement. I still have to figure up some number to put in the agreement as my "contribution".
  5. dougaustreim

    dougaustreim LawnSite Senior Member
    Messages: 488

    Your contribution is the net value of the assetts that your putting in.


Share This Page