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How To Hold Business Assets
Another frequent question I receive is whether a business asset (normally buildings and vehicles) should be owned individually or in the corporate name. Here is my response to a client who asked about an office building.
There is no cut and dried answer to the best way to own business assets, personally or in a corp. There are pros and cons to each tactic.
However, from a general sense, it is more advantageous to own real estate individually and lease it to the corp. This accomplishes a number of things. It allows you to pull income out of the corp that is not subject to payroll taxes. When you sell the property, the long term capital gains rates are lower for individuals than they are for corps.
The only big advantage I can think of for owning the building in the corp name has to do with liability. If someone were to get hurt in or on the business property, having it owned by the corp would prevent any lawsuit or judgment from going against your personally owned assets.
If you are going to keep the property in your personal name, you do need to clean up the payment stream. The corp should be writing you a monthly check for rent, and you should be making the loan payments out of personal funds. For loan payments already made out of the corp account, you should categorize them in your QuickBooks as rent expense and pick up equal amounts on your personal QuickBooks as rent income.
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 9/04/2004 02:53:00 PM Send this post:
