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?
The items that you're talking about in this situation would be immaterial in my opinion. Before you even get to the technicalities of accounting properly for something like this, do you really want to start a new business where your first transactions on your financial statements are transferring assets (furniture is not an asset even) that are all worth essentially nothing right now? Your entire focus should be on getting customers and not speaking with an accountant about the treatment of something that doesn't matter.
You are correct that these assets are certainly fully depreciated for tax purposes. I'm not a tax expert, but typically your tax CPA would have deducted these costs fully during the first year they were purchased by your consulting firm. So from a tax standpoint you don't need to do anything.
From a bookkeeping standpoint, have three options: 1) do nothing, 2) keep the assets on consulting company's books and charge a rental fee to start up company, 3) move the assets to the new company at their current values on consulting company's books.
I would do option number 1 unless you are an exacting accountant that can't stand for these assets to be on one company's books while another company get's the benefit or you want to show some assets on the start ups books. However, the assets are so immaterial at this point that they really don't matter, just a bunch of needless recordkeeping for the sake or recordkeeping. In other words, options 2 and 3 would be the "right" answer from an accounting standpoint if we were talking about a huge amount of assets, but because we're probably talking about a few thousand dollars of fully depreciated assets, you should take option #1.
Helpful?
You mentioned that you have a newly incorporated Startup, and an incorporated Consulting Business how are they incorporated? As an S-Corp or a C-Corp?
If they are S corp then none of that matters because because of the businesses activities will flow through on your personal tax return anyway. If it is C-Corp then you could look at the transfer of assets if you wanted to keep the books clean.
Also depending on the type of equipment you have, some of them may have a useful life of 5-7 years. You should first find out how they are incorporated, if S-Corp then it's best to do nothing in my opinion, because it won't change anything.
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.
