taxes, llcI recently started an LLC with a focus on network/voip design but I also build computers because.. why not. That being said, a customer was over the other day and while I was discussing his needs and possible courses of action he could take he asked if i had anything similar to what i described. I don’t maintain any product currently. My question is, if I build a machine to demo say a high end graphics design system, can i write this off as a business expense, assuming it’s used 100% for the purposes of selling? If yes, is it best to use depreciated value over time or a lump value at the start? Thus far I am nearing a break even point but still operating in the red. thanks!
This is more of an accounting question, so your best bet would be to speak with an accountant or ask your local tax authority. Usually they (tax authorities) have specific rules by which they decide what’s allowed as current expenses and what is deemed to be capital expenses. In Canada, for example, in most cases they treat purchases below $200 as current expenses, subject to certain conditions. In your jurisdiction rules are likely different.
Based on that threshold you either write off your expense immediately or keep it as a capital asset (until you sell it) and write off its depreciation, again, according to your local rules for that type of an asset.
In some cases you might be able to record in your books the process of building a machine as a series of “upgrades”, where each “upgrade” remains below the capital expense threshold. This could be risky, though, so I can’t honestly suggest this approach.
I am not an accountant (but I have been in your situation).
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