New Start Up Company

[AaronJ]

Hi, I'm new to the forum and hope I have placed this question in the right section.

I have friend that has started a car business and wanted to make sure that things are getting classified correctly in Quickbooks. The business is a LLP out of California.

1) He took a loan out of his 401k to start the business. What would that be classified under?
2) Parts that he purchased paint, motors, starters, etc…anything to do with cars, would that fall under cost of good sales. He has an accountant telling him that he cannot write off the parts until he sales a car. But if he doesn’t sale the car until the following year or what if he has all these parts and no cars to put them in? They are still deductible each year right? He buys the part, that’s a immediate expense.
3) He has a RV and they would go to car shows to try and sale parts and cars. Where would those types of expense’s be under? cost of goods or fixed? He would go every month. What about writing off the RV?
4) He ran his shop out of his house, what percentage is he entitled to write off each month? House payment, utilities??

I know it’s hard to answer these types of questions without knowing the whole situation, but any answers in the right direction would be great. Thanks

 

[Mike5380]

Just shooting from the hip here, but:

1. He took out a "loan" from his 401K? As far as I know, that's a Distribution and not something that you can repay, so there is no debt, it's classified as Cash. (and that's a very painful way to get it). So credit owner capital and debit cash.


2. Any cars or parts that he acquires are Inventory and need to be treated as such. The value of his inventory needs to be determined and properly accounted for in Cost of Goods Sold. So, I agree with his accountant that he can only include the cost of his parts used in his cars, when the car is sold. Inventories can appreciate and depreciate, but come tax time, his inventories will need to be assessed for value and reported accordingly.

3. Traveling to shows incurs expenses that can be spread out in the Operating Expenses, including Depreciation for the RV if it is listed as an asset owned by the company.

4. There is a percentage of the utilities that can be included in expenses for home based businesses, but I'm not sure of the amount. His accountant should be able to look that up, or maybe someone else can chime in.

I hope that helps.

Mike