Purchasing personal items to sell through LLC

[rwom1217]

I have a small business (LLC) where I am able to sell used (and new) items.  I have some relevant stuff I own personally that I'd like to sell through the business.  Can I pay myself through the company checking account (I would write a biz check) for the items?  (I would pay myself a reasonable amount that allows for profit on the business side, so no funny business.)

If so, would the amount I pay for the items (to myself) be an expense/cost for tax purposes?

[VolvoGirl]

It might depend on how you file the LLC taxes.   Do you file it as a Schedule C in your personal return as self employment OR do you file a separate business return for it like a 1065 or 1120-S?  

[rwom1217]

Schedule C - personal

[rwom1217]

Still looking for answers on this.  The biz taxes are done as part of personal taxes as an LLC.

Is this how it word work:  I personally own an item.  I write a check from the LLC account to myself, let's say for $250.  I then sell it for $300 through the LLC as a used item.  Forgive me if I'm not using right terminology here, but would I report the $250 as an expense/inventory purchase, then pay income tax on the $50 difference?

Or, do I basically have to "give" the item to the business and report the entire $300 as income?

[AmyC]

No, you can't pay yourself for the item since you and the business are one entity. You do have a basis in the item.  A sch C personal return means you would contribute the property to the business inventory. The basis for the property contributed is the lower of Fair Market Value (FMV) or your basis (what you paid for the item). Keep careful records to validate your numbers. This is not to be confused with the fact that you can pay yourself- that is- withdraw money out of your owner equity in the business.

As you sell items for a profit, you will have income. This income will have income tax and eventually self-employment tax.  Self-Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. 

As your income increases, you may need to make estimated payments for the income tax and SE tax on your business.

Additional information:

About Form 1040-ES, Estimated Tax for Individuals

Small Businesses Self-Employed 

[rwom1217]

Thank you.  Follow-up questions...

A) Regarding my basis, would FMV be based on its value when I bought the item personally, or it's value at the time I transfer it into my inventory?

B) When I transfer the item to my inventory, does the basis function the same as a cost as if I were buying a new item from one of my wholesalers?

C) Let's say I paid $100 for the item a few years ago.  If I sell it for $40 through the business, would the business show a loss of $60, thus reducing my tax liability?

This is separate, but you mentioned "the fact that you can pay yourself- that is- withdraw money out of your owner equity in the business."  Does doing this incur personal tax, or is it built into everything since me and the LLC are the same entity for tax purposes?  For example, if I bought a bunch of inventory for $1000, then sold it for $5000 the same year, would I pay income tax on $4000 at tax time?  Then, if I were to transfer that $4000 to my personal accounta couple years either that year, or a couple years down the road, would there be anything else to report for tax purposes?