How Do i Give my Personal Inventory to my New Small business?

[Papasmurf Collectibles]

I Will give as much details as i can, and this may not even be the best spot to post this question but i find it hard to find info on this. So i have been selling TCG products for the better part of 10 years as a hobby for the most part, never making more than 10k a year, but i decided to make an LLC recently and want to give the LLC most of what i have in my personal inventory. How do i go about doing this? I make a sheet with all the inventory on it, maybe how much i paid and/or the current market value of said inventory. than what? do i need to fill out some kind of form saying i gave this to the LLC, or can i just give it to the LLC and when tax season comes just have it as a note that  i got this inventory from myself at this cost. 

[AliciaP1]

You will "invest" the inventory into the business and should use the lower of the current market price or original cost to value it.  For your documentation, you should list all the items with their current market value and your original cost.  Then note which is lower and use that to total up the value of your inventory.  For your bookkeeping, this will be an increase to inventory and an increase to equity.  If you started your LLC in 2022 and chose to have your inventory available to the business all year, you will show the inventory investment as the beginning balance.

For tax purposes, if you are filing as a single-member LLC on a Schedule C of your personal 1040 return, you will enter your inventory creation by following these steps:

1. Within your tax return, go to your self-employed income or use the magnifying glass to search for Schedule C and click Jump to schedule c.
2. On the Your 2022 self-employed work summary page click Edit.
3. Scroll down to Inventory and click Start.
4. Answer the remaining questions regarding beginning/ending balances and current-year expenditures.

[Carl]

Assuming the business is a single member LLC that gets reported on SCH C as a part of your 1040 tax return, it's important to handle it correctly. I've lost count years ago of the number of folks who have messed this up big time, in their first year of business or first year dealing with inventory.  If you want to use the inventory section then be aware of the following.

Take special note that in your first tax year dealing with inventory, the Beginning Of Year (BOY) inventory balance has to be zero. This is because your BOY balance must match exactly your prior year End of Year (EOY) inventory balance. So if this is your first year dealing with inventory and you already had inventory in your possession at the start of the tax year, you will include what you paid for that inventory in the “Cost of Purchases” box in that first year only.

Beginning of Year (BOY) Inventory Balance - This is what 'YOU" paid for the inventory in your physical possession on Jan 1 of the tax year. it does not matter in what year you paid for it either. Note that in your first year of business or first year of dealing with inventory, the BOY Inventory Balance *MUST* be zero, with no exceptions. This is because your BOY Inventory balance must match your prior year's End of Year (EOY) Inventory balance. If this is your first year dealing with this, then the only possible way for these two to match, is if the BOY Inventory balance is ZERO. There are no exceptions.

End of Year (EOY) Inventory Balance - This is what *YOU* paid for the inventory in your physical possession on Dec 31 of the tax year. It does not matter what tax year you paid for it.

Cost of Purchases - What 'YOU" paid for inventory you actually purchased during the tax year. If this is your first year and you have inventory purchased in prior years, include what you paid for it here. (do not include costs for those things in other categories here)

Purchases withdrawn for personal use - What "YOU" Paid for inventory you pulled from your salable inventory for your personal use.

Cost of Goods Sold - What "YOU" paid for the inventory you actually sold during the tax year.