Machinery in corporation or individual name

[jmfox]

Another issue is whether to buy the machinery in the corporate name or as an individual? Even though I am familiar with the legal and tax consequences of both, I still cannot decide. Does anyone here have any suggestions based on experience, that was not obvious until later?

jmf

 

[Builder]

Another issue is whether to buy the machinery in the corporate name or as an individual? Even though I am familiar with the legal and tax consequences of both, I still cannot decide. Does anyone here have any suggestions based on experience, that was not obvious until later?

jmf

I think that if the machine is used in the business, then it's better to title it in the business and vice versa.

My accountant told me one of his other clients had a construction corporation like mine, but had a truck titled in his personal name. He used it on a corporation/business job and got into trouble on the jobsite. He then had a very difficult time explaining how his other personal assets were not subject to being named as assets in a lawsuit if he was already using his aforementioned personal truck on the job already.

 

[LoneCowboy]

Corporate
There's no downside
and there's a tons of downside for doing it the other way.
Tax man happy
insurance man happy
accountant happy
IRS happy

Everyone happy.

 

[jmfox]

Because I am using the machine to improve my homestead it is automatically covered by my home owner's policy (hazard and liability). If I decide to rent it or use it for purposes not related to my property I will get commercial coverage which, as most hear already know, is costly but necessary. If I put the machine in a corporate name I will need to get commercial hazard insurance and my home owner's policy will no long cover my machine for hazard or liability even if I am using the machine on my property. So I would need to pay for hazard and liability for coverage I would have with no additional cost if I owned and used the machine on my homestead. I really don't like paying for insurance twice.

jmf

 

[Builder]

Because I am using the machine to improve my homestead it is automatically covered by my home owner's policy (hazard and liability). If I decide to rent it or use it for purposes not related to my property I will get commercial coverage which, as most hear already know, is costly but necessary. If I put the machine in a corporate name I will need to get commercial hazard insurance and my home owner's policy will no long cover my machine for hazard or liability even if I am using the machine on my property. So I would need to pay for hazard and liability for coverage I would have with no additional cost if I owned and used the machine on my homestead. I really don't like paying for insurance twice.

jmf

If it all boils down to the insurance thing, you need to compare the cost of insuring it commercially to the incredible tax deductions for depreciation you'll get from your company's gross income.

I just spent over $50K on a used backhoe. My tax deduction for depreciation alone will pay for many, many years of a simple equipment insurance policy ($700/yr for my backhoe). The deduction you'd get from buying the equipment through your business would not be applicable through you buying it as a homeowner.

Seems like a no-brainer to me.