I run a small LLC that does IT support for local nonprofits. I'm thinking about buying used laptops and phones from people on Craigslist and Facebook Marketplace to refurbish and resell. Is this allowed for an LLC? Do I need a special license or permit? I'm in Ohio if that matters. Also, how do I handle receipts and proof of purchase if the seller doesn't give one?
LLC Purchases
Can my LLC buy used electronics from local sellers?
Ohio doesn't require a special license to buy used electronics as an LLC, but you'll want to check local ordinances. Some cities require secondhand dealer licenses if you're buying and reselling frequently. Your LLC can buy from individuals as long as you keep records for tax purposes.
Make sure you get a bill of sale with the seller's nmae, date, item description, serial number, and price. Even a handwritten note works. Without it, you could run into issues if the items turn out to be stolen.
Why not just buy from wholesale lots? Less risk of stolen goods.
Wholesale lots can be more expensive and you don't always know what you're getting. Local sellers sometimes have better deals, but you have to be careful. I'd suggest running serial numbers through a database like CheckMEND before buying anything expensive.
There's no state law in Ohio that prohibits an LLC from buying used electronics from individuals. But if you're buying regularly, you might be considered a secondhand dealer under local laws. Check with your city or county. Also, sales tax: you may need to collect and remit sales tax when you resell.
Also, if you're buying from individuals, you dont have to pay sales tax on the purchase, but when you resell, you do. Keep good records of what you paid to calculate profit.
What about liability? If you refurbish and resell, you could be liable if the device fails or causes harm. Make sure your LLC has proper insurance.
Thanks for the info. I hadn't thought about the secondhand dealer license. I'll look into local rules. And yes, I have general liability insurance for my LLC.
One more thing: if you're buying phones, check if they're reported lost or stolen. You can use Sites like Swappa's IMEI checker. If you buy a stolen phone, you could lose it and face legal issues.
Do you reall need to worry about that? I've bought used stuff for years and never had a problem.
It's a real risk. Especially with phones. I'd be cautious.
Also, if you're buying from individuals, you migh need to file a 1099-MISC if you pay someone $600 or more in a year. But that's only if they're not incorporated. Just something to keep in mind.
Your LLC can buy used electronics, but the real issue is proving ownership if questioned. A bill of sale with the seller's ID and signature helps. Also, some police departments offer safe exchange zones for these transactions.
I didn't know about the 1099 thing. I'll check that out. And I'll start using a bill of sale template. Appreciate the pointers.