topic Re: Opening LLC Partnership Startup in Get your taxes done using TurboTax

Opening LLC Partnership Startup

fourcheck — Sun, 23 Feb 2020 19:48:05 GMT

I started an LLC with four members total in 2019. Two members contributed cash and two members contributed inventory.

We entered the contributed inventory values in the member capital section as "Property Member Contributed to LLC", but we're not seeing this show up as an opening inventory amount. The software is not allowing us to manually enter "Beginning Inventory" in the COGS section. How do we properly enter this contribution as beginning inventory so it flows thru to assets, capital, COGS, etc?

Thanks for your help!

Re: Opening LLC Partnership Startup

Anonymous_ — Mon, 24 Feb 2020 02:14:38 GMT

You probably need to change the default answers in the Business Info tab About Your Business.

The default answers to COGS and inventory are "No" if you have anything other than a retail business. Regardless, check the defaults (toward the bottom of the screen) and edit them if necessary.

An entry in the partner capital section as a capital contribution will not automatically flow to the inventory section.

Re: Opening LLC Partnership Startup

Carl — Mon, 24 Feb 2020 00:37:09 GMT

When you start a new business and that business will be dealing with inventory, then Beginning of Year (BOY) Inventory balance ***MUST*** be zero. No ifs, ands, or buts about it.

When dealing with Inventory that's dealt with in the COGS section. (Inventory/Cost of Goods Sold).

Your BOY Inventory balance "MUST" match your prior year's End of Year (EOY) Inventory Balance. Since the business did not exist in 2018, there's no possible way a non-existent business could have any inventory on Dec 31 of 2018. Period. So that's why in the first year the BOY Inventory balance has to be zero. It doesn't matter if you may have purchased that inventory 50 years ago either. Here's how this works.

1st year:

BOY Inventory Balance - $0 This is what "you" paid for the inventory in your physical possession on Jan 1 of the tax year. This balance *MUST* match the prior year's EOY Inventory Balance. So if this is your first year dealing with inventory, the BOY Inventory Balance has to be ZERO. It does not matter in what year that inventory was purchased.

COGS (Cost of Goods Sold) - $5000 What *you* paid for the inventory you actually sold in the tax year. It does not matter in what year you paid for that inventory either.

EOY Inventory Balance - $2000 What *you* paid for the inventory in your physical possession on Dec 31 of the tax year.

The above indicates that you started the year (or started the business) with no inventory on Jan 1 of the tax year. Then during the tax year you purchased (or acquired through a capital contribution) a total of $7000 of inventory. IN that same tax year you sold $5000 of that purchased/contributed inventory leaving you with $2000 of inventory on Dec 31 of the tax year. The $5000 purchased amount is what gets deducted from the business's gross income.

Year 2:

BOY Inventory - $2000 What *you* paid for the inventory in your physical possession on Jan 1 of the tax year. Note that this matches exactly the pror year's EOY balance. If it does not, then you'll have some "splainin' to do to the IRS, and they will *not* accept any reason or excuse you give them.

COGS - $7000 What "you" paid for the inventory you actually sold during the tax year.

EOY Inventory - $5000 - What "you" paid for the inventory in your physical possession on Dec 31 of the tax year.

The above indicates that you started the year with $2000 of inventory. It matches the prior year's EOY inventory so no problem there. This it shows you purchased an additional $9,000 of inventory making your total inventory for the year $11,000. Of that $11K of inventory you sold $7000 of it during the tax year leaving you with a $5000 BOY balance on Dec 31 of the tax year. Only the COS amount of $7000 will be deducted from the business's gross income for the tax year.

Re: Opening LLC Partnership Startup

apedavid — Sat, 11 Jul 2020 19:24:14 GMT

So when does the Inventory we started out with show up ?

Example started in Oct 2019 with $40,000 in inventory. From when we were a sole proprietorship.

Sold $7500 worth of goods with $4528 in purchases and $1946 in ending inventory. $2582 cost of goods.

David

Re: Opening LLC Partnership Startup

Anonymous_ — Sat, 11 Jul 2020 22:26:21 GMT

@apedavid If you started a new business (or entity), then your beginning inventory would be zero and whatever you ported over to the new business would be placed in the purchases category.

EX:

Beginning inventory: $0

Plus Purchases: $44,528

Minus Ending inventory: $41,946

Equals - Cost of Goods Sold: $2,582