Whether you want to move assets into a newly formed company or one that already exists, it is important to keep in mind that the transfer may be recognized as a taxable cash sale by the IRS. What 'gain' or a 'loss' is recognized during the transfer will be dependent on the FMV (Fair Market Value) and the basis of the asset(s). The only exception to this is when the assets are transferred in exchange for company stock and then the individual(s) who received the stock takes 'control' of the company, by receiving ownership of 80% or more of the total company stock, immediately after the transfer, according to IRS code §351. This can work for both new businesses and old businesses a like.

A transferor can also move appreciated assets to a corporation without it being recognized as a taxable cash gain. This is because the securities received by the transferor are treated as 'boot', which is all money or property received in additional to company stock. Permitting a non-taxable shift of assets to an existing corporation delays the recognition of the loss or gain. It is not until the transferor gets rid of the company stock that was given in exchange for the asset(s) that the loss or gain is recognized. This is accomplished by assigning the company stock to the same source as the asset that was initially transferred in the move. It is important to note that transferred assets keep their basis in the hands of the corporation.

Steps to transferring your assets:

1. First you must begin the transfer process by forming a corporation and then forming an offer between the company and transferor for company stock in exchange for the asset. Note that money is recognized as property. Other intangible assets recognized as property include goodwill and patents. Services are not recognized as property.
   
   
2. Next, you need to have the offer accepted by the company via its shareholders and directors. The directors must also authorize the stock's issuance once the assets have been delivered.
   
   
3. Lastly, you need to execute and deliver the 'goods' to each party. It is very important to have recognized instruments of transfer, even with smaller companies. This helps you keep track of the price of the transaction and its terms.

For more information on forming a corporation or LLC for your business or for complete details on other helpful business and personal legal services, please do not hesitate to email us at info@adanaslaw.com, call us toll-free at 877-420-4600, or contact us online. Be sure to request your FREE Informative Newsletter and Business Start Up Check List!