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General Accounting Discussions: transferring assets from sole proprietorship into a newly formed partnership

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    • CommentAuthordannyew
    • CommentTimeJun 12th 2008 edited
     
    I have been a sole proprietor of an inventory based business (self-created products) operating at a loss. My husband wants to become an active partner as an LLC partnership. Should I close out the sole proprietorship books and start anew as a partnership(LLC)? If so, how do I treat inventory on the respective books if the sole proprietorship business no longer exists and the LLC now has the inventory? Is the inventory considered a capital investment on my part with our being husband and wife? Also, I will have to file a tax return for partial year on the sole proprietorship and don't know how to deal with the inventory.

    Thanks!
    • CommentAuthorJET1
    • CommentTimeJun 17th 2008
     
    I recommend that the Inventory be treated as an asset that is being transferred into the partnership. The Inventory should be treated as a capital investment regardless of the both of you being husband and wife. The sole Proprietorship books should be closed and open new books for the partnership(LLC)
    Thankful People: Raymond Johnson
    • CommentAuthorikeMAN
    • CommentTimeJun 17th 2008
     
    I RECOMMEND THAT THE ASSETS BE TRANSFERED TO THE PARTNERSHIP BY DEBITING ASSET AND CREDITING HER CAPITAL ACCOUNTS IN THE PARTNERSHIP. ON THE OTHER HAND THE LIABILITY FROM THE SOLE PROPRIETORSHIP BUSINESS WOULD BE TRANSFERED TO HER CURRENT ACCOUNT IN THE P'SHIP.
    • CommentAuthordannyew
    • CommentTimeJun 17th 2008
     
    Thanks! One more question: In closing the books on the sole proprietorship, what entries would I make? And, when you fill out schedule C, what's the approach to take regarding the status of "inventory" since I didn't actually sell it?

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