List below assets you already own that you expect to use in your business. This list is important for several reasons:
• To identify the assets that are available for use that do not have to be purchased. • To develop your business financial statement if you are planning a business expansion rather than a start-up. • To develop information for the Personal Financial Statement. • To develop the information you will use to show your contribution (non-cash) to the business.
• Much of these assets may be depreciated for tax purposes even though you already have them.
However you may choose to use this information, you should use cash value—it’s current market value if the assets were to be sold. It is not appropriate to use the cost if the equipment were purchased new.
Fixed Asset Needs
List below the fixed asset (equipment) purchases you anticipate for your business. Remember that all purchases do not need to be new items. Start now to find the best bargains. You should check prices for used equipment, demo-equipment, leasing, etc. Remember, the less you spend for start-up, the sooner you can begin to make a profit.
Two words of caution: (1) Remember, you are still in the planning stage and making purchases at this time is risky. This is a research activity. (2) Many business loans cannot be used to pay off loans for items already purchased, so items should not be purchased in anticipation of receiving a loan.
Example of determining depreciation: You purchase a computer and printer for your business at a cost of $3,100. The useful life by IRS definition is 5 years (60 months). Its salvage value is nothing after 5 years. You would depreciate it $620.04/year.
At the end of the first year, depreciation of $620 would be taken on the equipment. The depreciation will be listed in the Profit and Loss Projection and then, after the first year of business, it will be shown on the...