I have a newly incorporated Startup - pre-revenue and pre-investment. I also have an incorporated Consulting Business which I am winding down to 'maintenance only ' mode as I ramp up to full time in the startup. Fort he Startup I am using the laptop, printer, cell phone, office furniture, etc. that are all owned by the Consulting company. Is that an issue? Should i talk to my accountant about a transfer of assets? Have they depreciated enough to be worthless anyway (all 3 years old). It wouldn't make sense to purchase all new provisions for the startup. But should the Startup compensate the Consulting company?
This will depend upon whether your accountant capitalized and depreciated the assets, or were the equipment purchases expensed currently in the year they were acquired? Is your consulting company taxed as a C corporation, S corporation, or something else?
If your equipment was purchased through the consulting company and expensed currently, the equipment was never recorded as an asset, so you could simply transfer the equipment into the company.
If the equipment was being carried on the company's books as an asset, you can either sell the equipment to the new company, or distribute the assets to yourself as the shareholder, and recontribute the equipment to the newly formed startup. Whenever assets are distributed out of a C or S corporation, the distribution is treated as a deemed sale, so there may be some taxable gain if the fair value exceeds the adjusted basis in the equipment.
Answered 4 years ago
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