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Discussion Starter · #1 ·
Quick question, should I set up and purchase over 10K in new equipment as a business or on my own? :confused:

I am about to make the big purchase but realized there might be a benefit to doing it as a business rather than my personal account. At the end of the year I would like to reap the biggest benefit by writing off some of the 10K as a business expense. Should I establish a LLC through LegalZoom first, set up a bank account and then make the purchase through the business bank account?

Any help is appreciated!
Thanks
 

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Quick question, should I set up and purchase over 10K in new equipment as a business or on my own? :confused:

I am about to make the big purchase but realized there might be a benefit to doing it as a business rather than my personal account. At the end of the year I would like to reap the biggest benefit by writing off some of the 10K as a business expense. Should I establish a LLC through LegalZoom first, set up a bank account and then make the purchase through the business bank account?

Any help is appreciated!
Thanks
First of all, don't waste you money on LegalZoom. All the forms that you need to form an LLC are on your state's website. Fill them out & file them yourself.

It doesn't matter if you are a LLC or a sole proprietor you still can depreciate the equipment on your tax returns. You can not write it off the full 10K as a straight business expense on one tax return.

Now, you could purchase the equipment yourself, lease it to your business and write off the total lease payments. Your business can not depreciate the equipment because it doesn't own it. There's a lot more tax advantages of doing it this way, but you should discuss this further with your accountant, a tax professional or a small business counselor.
 

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Discussion Starter · #4 ·
I am not expecting it to be easy at all, I just want to use all resources available to me before making a big decision. I respect your input and experience but there are times when you need to take the big jump off the cliff. Given my age, commitments to others, finances and experience; now is my time.
 

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While running a business, one will always be posed with situations that one may not know what to do. Mistakes will happen no matter how much experience one has. Therefore, I believe that your advice for him to keep his interest at a hobby level is inaccurate. I believe his question dies not even pose an inability to have a sound business plan. He is doing it right. He is asking the rights questions before beginning. We all have!
 

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You can save a lot on sales tax if you set yourself up with a business liscence and resellers permit prior to buying your equipment.

No! You MUST pay sales tax on equipment unless you are reselling it. Even if you purchase from an out of state vendor, you are suppose to pay "Use Tax" on equipment. If you are audited by your state's Board of Equalization/Department of Taxation you will have to pay + fines & interest...
 

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You have to pay tax on anything you do not resell. There maybe some exceptions but that would be a state by state case. I don't know if 2012 allows a section 179 from the IRS but if so you can take a 1 time deduction instead of depreciation. You would have to consult a tax professional. Most states have the LLC forms on their web site NOT ALL. Some are also rather expensive is some states. A LLC is not required but more a protection of your personal property in the event you in default with a supplier or sued by a client.
 
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In some states you don't have to pay tax for clothing. If that's the case you don't have to pay sales tax for equipment that touches the garment.

Weird but true. You need to check with your accountant to make sure. If you pay taxes on clothing, than you'll probably pay tax for your equipment and have to charge sales tax.
 
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