Trying to figure out the ins-and-outs for properly managing my new LLC. My question relates to the products I am selling, and how to move those from personal property to my LLC business. For instance, say I have a comic book in my personal collection that I bought for $10 ten years ago (no record or receipt for it now), that is now worth $100. So, say I want to sell it through my LLC on Ebay. How do i handle that? Do I sell it from myself to the LLC for $10? or for $100? Do I give myself a receipt from the LLC, and do I actually transfer money from the LLC to my personal account? What's the best way to keep the taxes the lowest?
I assume you have registered your business with your state as a single member LLC. You really need "face time" with a CPA that can educate you on this. There's much, much more to operating a business than you may be aware of.
For your specific query, one thing you might want to look at is the SCH C Inventory section of the program. When using that section to track your inventory, the cost of that inventory is not deductible until the tax year you actually sell that inventory. It does not matter in what tax year that inventory was purchased either. (Some refer to the inventory section as COGS, which stands for Cost of Goods Sold.)
Within the inventory section you'll deal with numerous items used for tracking inventory. There are four basic things.
1) 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 tax year the inventory was purchased. If this is your first year doing business or your first year dealing with inventory, then your BOY amount *must* be ZERO.
2) 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 in what tax year the inventory was purchased either.
3) Cost of Goods Sold (COGS) - This is what *you* paid for the inventory you actually sold during the tax year. Again, it does not matter what tax year you purchased the inventory either. The amount you enter here is the amount that is deductible from your gross business income.
4) Items removed for personal use - This is what "you" paid for any inventory that you removed from the business for any personal type of use.
Note that your BOY Inventory balance absolutely must match exactly your prior year's EOY Inventory balance. If it does not, then you have some explaining to do to the IRS. There is absolutely no reason for the difference the IRS will accept either, other than "I made a mistake". So this is why in your first year of business or first year of dealing with inventory, your BOY Inventory balance *must* be ZERO - even if you originally purchased that inventory 50 years ago.
There are five basic "things", the fifth one being purchases of inventory (virtually all businesses that sell merchandise make purchases during the year.
Further, taxpayers do not enter the Cost of Goods Sold (COGS) as that figure is calculated from the preceding entries.
Do I sell it from myself to the LLC for $10? or for $100?
For federal income tax purposes, your single-member LLC (without an election to be treated as a corporation for federal income tax purposes) is essentially the same as you, individually; you do not sell anything to your single-member LLC.
You do, however, need some sort of documentation to establish what you paid for items you are selling. without which the IRS will consider that you paid $0 for them.