I have a single-member LLC that I'm trying to build up as a side business (mainly buying and reselling used furniture, some light restoration). I recently bought a few pieces at auction with the intention of fixing them up and selling them. Can the LLC own those pieces, or do I need to do something formal to transfer ownership? I used a personal card to pay, but I'd rather the LLC hold the inventory if that's possible. Any guidance on how to document this properly?
LLC assets
Can my LLC own furniture purchased for restoration?
Yes, the LLC can own them. But because you paid with a personal card, you need to document that the LLC either reimbursed you or that You contributed the items as capital. A simple bill of sale from yourself to the the LLC and a corresponding entry in the books should do it. Keep the auction receipt attached.
How much did the pieces cost? If it's a few hundred dollars, the documentation burden is minimal. If it's thousands, you might want a formal asset list with descriptions and values.
This is one of those things that's technically fine but practically mesusy. The LLC holds title to whatever it acquires, but you have to maintain the separation. Using personal funds without reimbursement or a capital contribution can pierce that separation if anyone ever challenges it. So just paper it.
Thanks. I should have added earlier that I also have a few pieces I bought before forming the LLC that I want to use for the restoration side. Can I just add those to the LLC's inventory retroactively?
Retroactively is trickier. You can contribute them now via a contribution agreement, but you can't backdate the LLC's ownership to before it existed. The date of contribution matters for tax basis and records. Document the transfer date as the date you actually assign them.
I've been through this. Keep a running inventory spreadsheet with purchase date, source, cost, and a photo. When you sell, note the sale price and date. It's not glamorous but it's saved me headaches at tax time time.
Also check your state's rules on sales tax and resale certificates. If the LLC is buying furniture to resell, you might be able to buy without paying sales tax by providing a resale certificate. But restoration involves labor and materials, so the treatment can get complicated depending on your state.
One more thing: if you're doing doing restoration work, consider whether the LLC needs a separate business license or permit in your city. Some places treat furniture repair as a distinct activity from retail. The ownership question is easier than the compliance question.
The bill of sale approach ferrous_wheel mentioned is what I'd do. Keep it simple. One page, signed, and dated, stating the LLC acquires the listed items for X consideration (even if that consideration is a credit to your capital account).
And don don't forget to actually record the capital contribution on the books. If you use accounting software, create a journal entry debiting inventory and crediting owner's equity (or a loan from owner, depending on how you want to characterize it). The tax treatment differs slightly, but either is workable if documented consistently.
That makes sense. I'll start with the items I bought after formation and handle the older ones as a contribution with a clear date. I hadn't thought about the resale certificate angle either.