Collection

How do I transfer personal collectibles into business inventory?

I want to start a small business / website selling old toys and other collectibles. Many of these initial items would come from my personal collection. How do I handle converting an item I've owned for 20 years into business inventory? My concern is that I don't remember what I paid for most of these items, so how do I determine costs versus profits when tax time rolls around?

Public Comments

1. today's value. The business does a purchase sales agreement to you and writes a check to you to complete the transaction
2. It is a simple accounting function since your business is selling your items essentially on consignment. The business technically doesn't own the item until after it is sold and value is established. At that point one way to handle the transaction via accounting is the businesses cash is credited and accounts payable (to you) is debited. After you credit your accounts payable (to you) and debit your cash, you could then reinvest the cash back into your business by again crediting cash and debiting your owners equity account to reflect the value in the business. Another way would be simply to estimate value of inventory at current market value and credit inventory that amount and debit owners equity that amount. To me this way would be much harder and less reliable than the other method because it could look like you may have made a huge profit or perhaps loss when you really havn't. You could do the same thing when the items are sold and you would know value and simply credit cash and debit owners equity. What you really want to do however is take full advantage of tax law and minimize your income from the sale of these items. A business may be a great way of doing that since you can also deduct other expenses - such a shipping, transpertation, etc. If you estimate your items value AFTER they are sold, your income should be a loss assuming you take other expenses and inventory value = sales value. Sorry this is such a technical answer. If you're going to use an accountant he would understand that the business as an entity is selling your item on consignment. Good luck in your quest.
3. Unless you are incorporated, it does not matter. You could transfer the whole lot at $1. Profits in the business are taxed when you sell the item. If you transfer it at $1mill, the company has an exepense but you have personal income, and they offset each other. FWIW, selling long-held personal items like this is generally not considered a taxable income, especially on a small scale. Why not just sell them personally and stick the money in your pocket? When you start buying new items for resale, you can start the business accounting stuff. But you should see an accountant about this either way.