Question for you accountants...

[Patrick]

What about after a set time?

I'm just thinking if you run a business for 5 years with minor assets that would depreciate. Let's say car, office supplies, minor tooling. After 5 years you stop basically running the business but keep the LLC open. Would closing it after another 10 years make a difference? I would think the depreciated value & basis vs fair market value would be so minimal it's easy to say 0.

But I'm not an accountant and that's why I'm asking. 🙂

Example:

I open an LLC with a single investment property. I writeoff repairs, a lawnmower, painting supplies, lots of misc tools, etc. After 5 years I sell the house and decide this side business is not my thing. After another 10 years, any issue closing the business with what essentially at that point is barely yard-sale priced items?

@clarkenstein - doesn't this apply?
there is a minimum business tax in nj of $500 and there are a couple other things like filing fees that come up during the year.
State doesn't really care if you are inactive if an llc.
https://www.state.nj.us/treasury/taxation/condissolv.shtml

if it is a side business, and you are the owner, you are not entitled to collect unemployment if your main job belly's-up.
so there is that issue.

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do you want to know the accounting rule or what people actually do when they sell a fully depreciated asset? esp at a yard sale.

 

[Mathers]

I bought my AV and automation system and claimed it as demo last year. Not that my small business makes much money it helped.

 

[Fire Lord Jim]

Wow. I am not an accountant, but I was a CPA before retiring.
I like the business use scam... I mean plan. I did it with a new truck. Buy the bike, use it only for business, and after 5 years (or 7) you own a fully economically depreciated bike in mint condition.
If you ever sell that bike you recapture depreciation as though it was income.

 

[Jmann]

An accountant friend of mine told me I should start some sort of business related to cycling. The idea is I could write off my cycling related expenses for three years even if I didn’t make any money, as your allowed to own a business that shows only losses, at least for the three years.

 

[Patrick]

Wow. I am not an accountant, but I was a CPA before retiring.
I like the business use scam... I mean plan. I did it with a new truck. Buy the bike, use it only for business, and after 5 years (or 7) you own a fully economically depreciated bike in mint condition.
If you ever sell that bike you recapture depreciation as though it was income.

the salvage value of everything small business is zero...😉

 

[Blair]

I have wondered, if someone has a business like this for let's say 5 years, and it ends up they need to close the business. Most likely reason of course it isn't a huge money maker.

What happens to the "assets" of an LLC? Do you close the business and maintain ownership of all these items without any tax implications? Or need to sell the on-the-books value of the business to yourself and pay taxes on that?

I would either expense it straight away or depreciate them to zero then there are no assets and the business takes the expense through the years. If you have an asset on the books with value I’m not sure what happens to it. Make it have no value then no problem. Again the goal is to minimize any tax/claim the appropriate expenses related to the business.

 

[clarkenstein]

I would either expense it straight away or depreciate them to zero then there are no assets and the business takes the expense through the years. If you have an asset on the books with value I’m not sure what happens to it. Make it have no value then no problem. Again the goal is to minimize any tax/claim the appropriate expenses related to the business.

you get stuck with how you classify the assets. The state/feds determine how you depreciate things, so there are always permanent book to tax differences. There are certain elections you can make to accelerate. All those rules don’t require a whole lot of research - you’ll find CPAs jumping on google too.

@Patrick as far as shutting down a LLC there’s fees there too. It all depends. That’s why starting a LLC isn’t something to just “do”. The state and fed know the ways people try to get around the rules. That said, there’s a record low number of auditors to keep up, but the computer audit systems are getting better.

im far from an encyclopedia with this stuff. LLCs are not my regular run of crap to take care of. I know enough to be dangerous.

 

[clarkenstein]

Sorry one last random tidbit you won’t find on google so easy. Another thing to watch out for with LLCs - hobbies.

if you continuously record losses, after a certain period goes by, your business can be classified as a hobby by the authorities. If that happens there will be financial impacts, and all those things you’ve been writing off go bye-bye. Again, they have to catch it, but with the data mining abilities now, it’s easier to catch.