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Established Member

How do I add existing equipment to my assets?

I am fairly confused about how to add business equipment to QBO. We (my business partner and I) own several thousand dollars in audiovisual equipment, which we purchased years ago for personal use. Nowadays, we are creating a LLC in order to branch out as freelancers and leverage this equipment for commercial use. These items of equipment are the only real assets the company has because we are a home-based business (i.e. no studio) which performs AV work on location.

After this point, I am stumped. I have read the help articles about "machinery and equipment" fixed assets and receiving  "in-kind contributions", but it really does not make sense to me. The tutorials seem to focus on sales inventory, but we are providing a service with this equipment, not retailing it. Any thoughts?

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Best answer 10-15-2018

Accepted Solutions
Established Community Backer ***

LLC is not the issue, you are forming a partnership.  You...

LLC is not the issue, you are forming a partnership.  You will have to decide whether to be taxed as an s-corp or not first.  My suggestion would be no, stay an llc partnership.  And assuming you continue as a partnership for taxes, the following is how I do it.

For a company taxed as a sole proprietor or partnership, I recommend you have the following for owner/partner equity accounts  (one set for each partner if a partnership)

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

First you determine the current fair market value (FMV) of the equipment you have.  What it would sell for now in other words.

In the chart of accounts, create a fixed asset type account called audio-visual equip, zero balance

For each piece of a/v equipment, create a fixed asset (FA) SUB account of the audio-visual equip account,  named for the item, and create a sub fixed asset account for that item called accumulated depreciation-a/v name. ie

audio-visual equip.
>> Camera, nikon
>> >> accumulated depreciation - Nikon
>> Projector, Sharp
>> >> accumulated depreciation - Sharp

etc

Create one expense account called depreciation expense

double click on the account for the a/v fixed asset (ie camera) to bring up the register, make a new entry as an increase, use the FMV you determined earlier, and as the account select the partner>equity>investment account for whichever partner is bringing that item to the business.

S-corp accounting is a lot different and requires payroll too.  And with the LLC registration, that provides similar protection against legal issues as the s-corp does.
5 Comments
Established Community Backer ***

LLC is not the issue, you are forming a partnership.  You...

LLC is not the issue, you are forming a partnership.  You will have to decide whether to be taxed as an s-corp or not first.  My suggestion would be no, stay an llc partnership.  And assuming you continue as a partnership for taxes, the following is how I do it.

For a company taxed as a sole proprietor or partnership, I recommend you have the following for owner/partner equity accounts  (one set for each partner if a partnership)

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

First you determine the current fair market value (FMV) of the equipment you have.  What it would sell for now in other words.

In the chart of accounts, create a fixed asset type account called audio-visual equip, zero balance

For each piece of a/v equipment, create a fixed asset (FA) SUB account of the audio-visual equip account,  named for the item, and create a sub fixed asset account for that item called accumulated depreciation-a/v name. ie

audio-visual equip.
>> Camera, nikon
>> >> accumulated depreciation - Nikon
>> Projector, Sharp
>> >> accumulated depreciation - Sharp

etc

Create one expense account called depreciation expense

double click on the account for the a/v fixed asset (ie camera) to bring up the register, make a new entry as an increase, use the FMV you determined earlier, and as the account select the partner>equity>investment account for whichever partner is bringing that item to the business.

S-corp accounting is a lot different and requires payroll too.  And with the LLC registration, that provides similar protection against legal issues as the s-corp does.
OIM

Hello, I am new to quickbooks and have a client with exis...

Hello,

I am new to quickbooks and have a client with existing gym equipment. The gym has been operating for 3 years and do not have accounting books.  I want to know if they go into the equity investment or fixed assets?

I looked over the answer above and it left me confused. The client has provided the FMV, life and deprecation.

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

Thanks,

Annette

Established Community Backer ***

@go.figure.bookke "The gym has been operating for 3 year...

@go.figure.bookke

"The gym has been operating for 3 years and do not have accounting books"

Get their Tax filings, then. Their asset and depreciation treatments would be in this filing.
Established Community Backer ***

Keep in mind that using FMV on startup can be a problem a...

Keep in mind that using FMV on startup can be a problem and result in Taxable Gain to the person who owned the equipment, before "contributing" to their startup entity. You have to meet with your own CPA for how the tax rules apply.

Example: You each were running as Sched C entities and already completely wrote off that equipment. Now you put FMV as if you just Sold it to the partnership entity = You made Money on this sale.

Active Member

Re: LLC is not the issue, you are forming a partnership. You...

 

"S-corp accounting is a lot different and requires payroll too.  And with the LLC registration, that provides similar protection against legal issues as the s-corp does."

Could you go into what I would do with a s-corp in this instance.

Thanks.