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| *SoulEyes Photography>>>Photography Equipment |
I am starting a photography business. Does equipment I already own become assets for accounting purposes? |
Does my camera and imaging equipment that I already own and will be using for my business become depreciating assets? My business will be in Canada. Well, the Canadian Accounting standards and the American Accounting standards are very similar, so i'll answer with 99% confidence that the way such cases are treated in the U.S. are identical in Canada. For a company to be able to record a depreciation expense, it must do so for assets it (owns) for accounting purposes. There are really three cases in which a company may record a depreciation expense. 1. The obvious/traditional acquisition of an asset through a simple purchase. The company owns the asset for both accounting & legal purposes. 2. Capital Leases. When there are one or more elements in a lease agreement which imply that a transaction is more like a sale than a lease, the company owns the asset for accounting purposes, reguardless if legal ownership has actually transfered. 3. Non-Cash Investments. If the company is to record depreciation of an asset that does not fall into the first to categories, then it must be the case that the company has legal ownership of the assets. This means that you have actually surrendered your imaging equipment & camera to the company in exchange for stock or some other form of equity in the company. If this is not the case, then the company may not record depreciation expense on these assets. A simpler way to tell is to look at the respective tax returns for both the company and yourself. If you are able to take a depreciation expense deduction, then the company is not allowed such a deduction for the same assets. On the other hand, if the company is allowed to take a depreciation expense deduction, then you are not allowed to take such a deduction. Now, as a practical matter, in the early years, the company is most likely losing money, so the deduction will only serve to create a larger Net Operating Loss for that year. In the later years, the company will without a doubt benefit more from the deduction than you would, because the marginal tax rate would be greater, so the tax savings that the deduction has to offer would be greater. So, if you're starting the company, it's best to keep the assets in your name, and take the deduction for yourself to cancel out some actual income. Believe me, the first 2-3 years are very rough on a new company; especially in the tax world, since the Tax Code calls for accellerated methods of depreciation, so your taxable income for the year will be in the negatives, giving you a Net Operating Loss. I hope this was helpful, Best of luck on your new business! Source(s): Tax Attorney & Senior Financial Consultant, CPA, N.Y. no. not if you personally bought it before you started the business. but you can write off the cost on your taxes as a business expense. your personal taxes that is. I would ask your accountant. We were in a similar situation this year, as we have a lot of tools purchased before we officially started our business. Our accountant said depending on the time of purchase, we could use some of them but not all of them as write offs. you would need the original receipts in any case, so hunt those down and take them into your next appointment. you may be able to deduct some of the depreciation on those assets, but not all of it. |
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