Why You Should Rent Equipment to Your Own Business

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Have you ever wondered why you should rent equipment to your own business?
Over the years of working with clients, I've had a several clients that owned a building or owned equipment.
Rather than having the operating entity own the building or equipment, the clients were advised to set up one entity for the operating business and another entity to own the building and/or equipment.
This video goes into several reasons why a business owner would want to separate their business operations from their building/equipment.
ABOUT ME:
For many years I worked at very large national and regional CPA firms preparing taxes. I always wanted to start my own tax business, but always felt like I needed to learn more about taxes before I could go out on my own.
One day, an opportunity came my way to partner with a couple women and start our own tax firm. We worked hard and quickly grew the firm to seven figures.
I now help others gain confidence to start their own tax business by teaching them how to prepare tax returns for their clients.
If you haven't watched my free webinar on how to add tax preparation to your bookkeeping business, watch the webinar at www.taxtutor.com
If you have already watched the webinar and want help from me, you can book a free call with me to see if I can help you add tax preparation to your bookkeeping business - www.taxtutor.com/apply

Опубликовано:

4 янв 2022

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Комментарии : 20

@NorthTexasEagle1989 2 дня назад

Sweet video

@henryp9600 Год назад

Great video, went in assuming it was a tax play but I do see the legal protection in it. Thanks!

@TaxTutor Год назад

Glad it was helpful!

@mohammadhijazi6907 2 года назад

Thanks for the info! When you say that the owners will elect to treat the two entities as a one unit, does that mean for tax purposes only? And if those entities were a L.L.Cs, can they be taxed as if they were a one S corp?

@TaxTutor 2 года назад

The election is to treat the entities as one unit on the owner's 1040. Separate tax returns are still filed for each entity. Just the owner's tax return treats the separate entities as one on the personal tax filing.

@hopetolight 2 года назад

This was very helpful! Does this impact financing as the leasing company may not have the provable income/history (as revenue is being generated in the operating company)?

@TaxTutor 2 года назад

If the finance company is smart, they will recognize it is all one company and should be treated as one company. I've had to explain the concept to several finance companies in the past, but they seem to be getting more comfortable with the concept as it is becoming more common.

@hopetolight 2 года назад

@@TaxTutor very helpful!! Thanks Merrill!

@Tex_155 5 месяцев назад

If company sets up company to rent its vehicle fleet to op co how does it avoid sales tax? Seems similar to tool example you mentioned.

@TaxTutor 5 месяцев назад

That could be a potential issue, depending on the state. If the state charges sales tax on leases, then sales tax would need to be considered.

@UltimateAldean Год назад

I'm buying a rental equipment company that has property, and I asked the seller about this. He mentioned that he has a larger insurance policy to cover the additional risk because if he was to separate them and lease the building back that he would be subject to an additional 7% tax, per FL law. Thoughts? Thank you in advance.

@TaxTutor Год назад

That is an issue for Florida. As of the time I write this, Florida is the only state that charges sales tax on the rental of property. The additional 7% tax in Florida makes this structure less advantageous for tax purposes. You should consult an attorney in Florida to see how they recommend setting up such a structure.

@peakyhollows Год назад

If you change the example from a building to equipment, and assume the equipment is owned personally by the owner, isn’t that tax advantaged in terms of now expenses that may have previously been disallowed are deductible? Thinking of depreciation, maintenance, even the property taxes potentially. I’m assuming the “truck and trailer, tractor, etc. “ are owned by the individual, but then leased to an llc who performs tree services. Income is recognized by the lessor, but those expenses that would have been personal expenses can be offset, correct. Or even better, the lease indicates the llc will pay maintenance and fees, including property taxes , during the lease period.

@67_PowerStroke 9 месяцев назад

This is the exact situation i'm in. I've been a sole proprietor doing tree work for the past year. I have purchased a forestry truck, chipper, skid steer, trailer, and more as an individual. I am now creating an LLC and trying to figure out how to transfer all of that equipment that I spent over $60k of my own money on into the LLC and get tax credit for it.

@heathercurell1991 5 месяцев назад

I am turning my hobby farm into a business. In 2023 used all my heavy stuff; tractor, forks, digger etc for the business and its personally owned. This is the first year I am filing taxes for the business as it is new. Currently it is a sole proprietorship. I plan to LLC this yeIar. For 2023; should I "sell or lease" the tractor to the sole proprietorship?? If I claim equipment lease fees is this helpful or does it just up my personal income and become a wash? Any other thoughts to a tax advantage??

@TaxTutor 5 месяцев назад

There is not much tax advantage to leasing equipment to yourself or to your own business. It is a wash on your personal return. It is more of a legal play to potentially help with liability issues that may arise. It is best to consult with an attorney if such an arraingement is beneficial to you.

@babsyhulk 13 дней назад

dislike - the title of the video does not match with the video says it also doesn’t really tell me anything other than it would save some money on taxes, but it’s kind of not worth doing but my thing is why not if it saves money?. It was pretty general.

@edentulate1 5 месяцев назад

I don’t think your video is accurate. It does impact taxes. If the operating company owns the building and pays no rent then they have extra income to pay out as wages…. Or a distribution against against the shareholder basis. Wages would be subject to payroll taxes but rent wouldn’t. A distribution wouldn’t be subject to payroll taxes either but it also requires a basis and subject to paying a reasonable wage. I think rent is cleaner way to avoid pay roll taxes and decrease active income

@TaxTutor 5 месяцев назад

If no rent is paid, then the leasing company would not recognize any income and would just have expenses. That would create a loss in the leasing company that would offset the additional income in the operating company. Either way, everything washes out in the tax returns.

@edentulate1 5 месяцев назад

@taxtutor Not if you do a Triple Net Lease… as such you’d get to write off all the expenses through the leasee’s business, and the leaser would be on more solid ground claiming it as passive income.