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Partnership LLC - any tricks?

Discussion in 'Business Operations' started by Smitty58, Nov 30, 2004.

  1. Smitty58

    Smitty58 LawnSite Senior Member
    Messages: 531

    My son and I are going into business and are looking at what is the best way to set it up. We are thinking about LLC ,but have some questions. We will be sitting down with a cpa ,but would like to hear how you guys do it. Do you draw a salary off of the business? Are there any other tricks ,like (your company) renting your truck from yourself. Seems like I've heard of some neat LEGAL tricks like this. Any help is appreciated.
  2. cleancutccl

    cleancutccl LawnSite Senior Member
    Messages: 698

    Basically what I do is I have a personal truck, which my business leases from me (you can set any reasonable price for this, usually fair market value). Then I pay myself a wage, 15.00/hr, then match that same wage with payable/receivable to myself (sole proprietorship). With an LLC you are able to do this, or you can pay yourself a wage only. You can also rent storage space from yourself, but that gets a little tricky if you were ever to be audited. Instead of renting space from myself, I just deduct a usage percentage off of my income. Percentage of business use space gets to deduct that same percentage of utilities. Your CPA can give you some other tricks, these are just some that I use.
  3. Smitty58

    Smitty58 LawnSite Senior Member
    Messages: 531

    Thanks cleancutccl - I thought I heard of someone renting their truck back to the company. So let me get this straight, say I have a new truck and I'm making pmts on it ,I can lease this to the company? What does that do for me?
  4. muddstopper

    muddstopper LawnSite Silver Member
    Messages: 2,341

    Basicly it lets you turn your monthly truck payments into a business expense that is tax deductable for the business. Problem is that you also have to report the lease money you would recieve as personal income. That would mean having to pay taxes on your truck payment. I invested my truck in my company. This would be considered a capital investment, same as cash. This way my company is paying for the truck and paying me back for my initial investment. Since I am just recoupeing my initial investment I dont have to pay taxes on the money recieved. Since my company is paying for the truck it becomes a business expense that is tax deductable. The company is also taking depreciation on the truck. Once the truck is paid for and fully depreciated, I can buy the truck back from the company at a lower price if I choose to, or the company can sell the truck or use it as a tradein for a newer truck. If I buy the truck back the purchase price of the truck will be reported as recouped income,(residual value), for the company but, since the company would set the price the amount recouped can be set pretty low so as to limit the taxable amount. If the truck is traded for a new one, the trade in value becomes the residual value and will affect the depreciation value of the new truck.

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