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Lease agreement

Discussion in 'Business Operations' started by yourlawnguy, Feb 11, 2003.

  1. yourlawnguy

    yourlawnguy LawnSite Member
    Messages: 228

    I am a sole proprietorship. What I want to do is lease my truck to myself (the business) so that I can have the biggest write off and have the cost of the truck payments covered. I'm looking for an example of a lease agreement for this purpose if anyone has one.
  2. bruces

    bruces LawnSite Senior Member
    Messages: 648

    As a sole proprietor, you and the business are one and the same.

    A lease from you to the business is a sham transaction with no substance.

    Save your effort. What determines the deductions will be the business use of the truck vs. the personal use.

    Keep good records of the business mileage.
  3. dklawncare

    dklawncare LawnSite Member
    Messages: 79

    I agree...make sure you keep up with your records...you get 36.5 cents per mile you travel on business...so if you are going to give an estimate, traveling to look for new yards, or even going to the lawn equipment store, keep track, because it all adds up.
  4. Shuter

    Shuter LawnSite Bronze Member
    Messages: 1,171

    I also agree with the mileage. I am a sole proprietor. I keep a mileage book in the truck and write down the date and start and end miles for anything that has to do with business. It can be a pain to do it everyday, but once you get in the habit it is no problem.

    Short story. I know a guy who bought a shed and then went into business for himself after buying shed. He tried to lease the shed from himself to use it as a monthly write off, it did not work.
  5. kutnkru

    kutnkru LawnSite Silver Member
    Messages: 2,662

    I have heard before of companys who will sell their vehicle and then lease it back to the company putting your hard earned $$$ right back into your company.

    Check with your CPA about what the advantages to the seller-lessee agreement would be. I know there are stipulations or criteria that must either be met or avoided (dont know which) to make the transaction a capital lease v. an operational lease.

    Your CPA can better get into the details with you about the amortization of the leased asset and transaction capital.
  6. bruces

    bruces LawnSite Senior Member
    Messages: 648

    Again, this will only apply if you are incorporated or a multiple member llc or partnership. If you are a sole proprietor or one person llc (same thing for tax purposes) you can't do this, you are only dealing with yourself, not a separate entity.
  7. kutnkru

    kutnkru LawnSite Silver Member
    Messages: 2,662


    Is their a "leahmans term" (simple) description of how this would work for those that are not LLCs or SP??

  8. bruces

    bruces LawnSite Senior Member
    Messages: 648


    Not quite sure what you're asking?

    Also, the sale / leaseback isn't something I see hardly ever with my small business clients.

    It seems to me that it is kind of like a dog chasing its tail.

    If you already own the equipment I don't really see a benefit to selling it and leasing it back. You can accomplish the same thing by taking out a loan against the equipment if it is paid for.

    That would give you some available cash.

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