Question

How to deal with personal inventory transferred to business inventory

Forum|Forum|6 years ago
April 20, 2020
1 reply
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Hello.

I sold leggings for a Direct Sales company between Jan-Sept 2019. I decided to branch out on my own and register a business/give myself a name on Sept 3, 2019. I had $1725.75 worth of inventory (that's cost) that was purchased prior to Sept 3, 2019 that I folded into the new business and consequently sold at retail, between Sept 3-Dec 31, 2019.

I'd like to know how to deal with this on my first-year sole proprietorship taxes?

Obviously I want to show the lowest income possible for my first non-full year of business, so if it means I have to donate that $1725.75, I will - but I just don't know how to do it on my TurboTax file.

Thanks so much in advance!

Not A Product Question

VictoriaD75

It sounds like from Jan-Sept and from Sept-Dec, you were doing the same thing, you just created a business name. Even when you were working at the beginning of the year under your own name, you were still considered a sole proprietor. Really, there is no change in business entity when you created a business name in September.

You will report all income and expenses for all of 2019 on the same Schedule C. Even prior to the change in September, you were a business. You must include all income and expenses as such for the entire year. The inventory purchased during that time will be considered inventory of the business.

Follow these steps to add your business in TurboTax:

From the Federal menu, click on Income & Expenses
Expand the menu for Self-Employment
Click Start/Revisit next to Self-employment income & expenses
Edit next to the business or Add the business if needed

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G

GQuickly

Hi,

I too have a similar situation that I am stuck on. I hand craft clothing and accessories and in June of 2020 I decided to make my practice full-time. I registered my business as a single member LLC and by July, most of my items, supplies, and materials that were purchased "pre-llc' via personal funds became my business' initial inventory.

1. What would be the best method of accounting for inventory, COGS and assets that were not acquired through the business during start-up?

2. What is the proper way of showing this on a schedule C?