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Old 9th June 2006, 03:55 PM   #1
1LOW8TE
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Default Questions about Incorporating

I plan on Incorporating my Lawn Service in the near future. My question is this. I'm currently rasing money for start-up capitol. I want to start buying equipment. Do I have to wait to claim this on my taxes? Or should I wait until I Incorporate first? I will not show any profit this year because I will not start service until next year.

P.S. This is a start-up business


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Old 9th June 2006, 10:06 PM   #2
Logan
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Congrats on taking that step forward!!

Its a tough question to advise someone on, as always its best to consult an accountant. I'm a bit confused by your question, as i'm not clear if you want to claim this expense on your personal taxes now or business taxes down the road. Regardless of that, I think an accountant can let you know how you can move forward now while not negatively impacting your tax situation. For example, my understanding is that since your biz doesn't exist yet it isn't very relevant now. You can purchase equipment personally, then when the business is established what you contribute to the start up (i.e. equipment previously purchased) is factored in to the startup based on your contributions to it. You can't claim on your personal and business both though - one or the other.

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Old 10th June 2006, 02:44 AM   #3
foxdmatt
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Your choice of incorporation also matters on the taxation. If you are going to incorporate as an S corp, then you will have flow thru taxation which means the business losses you plan to incur the first year will be written off against any other earnings you have for that year. If you use a C corp, then your company will be taxed alone, without the flow thru option. Ask your accountant and lawyer about your choices of incorporation and the possible tax benefits of each form.

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Old 10th June 2006, 05:26 AM   #4
1LOW8TE
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Maybe I wasn't clear enough. I know I cannot claim taxes on both personal and business. If I buy the equipment now, can I still claim them on my business taxes next year? But the kicker is this: My business won't exist until next year. I will not be claiming these on my personal taxes. Thanks for the info.

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Old 10th June 2006, 10:27 AM   #5
Logan
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Based on what foxdmatt commented, evidently you need to also consider the type of corporation you form. Please don't go by our word alone on this, but do some due diligence and confirm things.

I personally think you will be okay, without having issues ... but if you are spending money a good accountant will be worth their costs.

My understanding of this has to do with the flow of ownership of the equipment.

1) You buy from store and own personally
2) You start corp
3) The ownership of the equip is transferred from you to corp

When ownership of the equip is transferred to the corp, it becomes an expense applied against the earnings you will be making by using the equip. Hope we are helping, more than confusing you.

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Old 10th June 2006, 02:09 PM   #6
1LOW8TE
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Thanks for all of the input. After two weeks of considering what structure I wanted to establish I've decided to just become a sole owner. Easier on Taxes and start-up. If the business grows like I plan then I will incorporate down the road.

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