Just a curiosity here that needs to be satisfied. How many out there are part of companies that own heavy equipment as well as a "rental" division as well? IE, your rental arm of the company rents the equipment back to the excavation/construction arm for use on projects. Basically two separate companies. I've only heard of this and i'm not sure if it's urban legend or a common occurance? I presume if actual practice that maybe it's the tax implications that help drive this decision? thanks!
Yeah, and if the equipment has your company's name on it, all the better. Free advertising===provided they are decent operators.
Paper trail for tax purposes,Irving does the same thing just on a much larger scale,I think we had a mini in the refinery one time that changed hands 4 different times till it made its way to Gulf from the Cat rental store.
if you're a subchapter S corp, lot of people set up leasing company with individuals owning equipment, leasing equipment to their excavating company. rental income is "unearned"....no social security withholding on it. so every dollar they draw from the corp in rental payments is like a $1.15 dollar to the average joe. lease payments are 100% write off to the corp.
My dad used to rent out his stuff back in the 80's. That ended when someone ripped the belly pan off of his 955 when they tried straddling a stump.
Rifenburg Const. has a rental company that is seperate
My fatherinlaw had 2 co's 1 owned the equipment and the other did the work. If the working co. got in a jam and had hard times the equipment was protected. ie: sue co "A" you could not tuch co. "B's" equipment. or Co "A" could go bankrupt and co "B" would still own the equipment. I do beleave thoes loopholes for the most part have been closed. The reason I say that is in todays world the co's CEO is held responcible for the corperations libalitys. At least here in Alaska they are. Today people try to protect there assets by running ther business as a LLC (Limited Libality Corperation). Personialy I think it is wrong to not be responcible for ones actions. If you screw up you should have to pay the piper. But then again that is just my opinion. Dwan
Forsythe, You are talking about only renting the equipment back to yourself, correct?? I have heard of this & I know 1 guy who does this. If his excavation company makes good money one year, his lease payments are very high, which makes his rental company a lot of money, which in turn buys a new piece of equipment. I am not sure of the reasons he does this, but he seems to believe in it. Another thing is that it may protect the equipment from the frivilous (sp.) lawsuits that seem to be everywhere these days. Owning up to your mistakes is one thing, but getting sued by someone who could not afford to have the work done in the first place is another. Suing to get out of paying is becoming more & more common & anyone who owns their own business must be aware of it.
Yes, correct. Lots of good feedback here, esp. pointed out by Dayexco. I forgot about the 100% deduction for leased equipment....
We have 2 company's one owns the equipment the other leases it...has been working out well for us so far
I personally know 2 owners near me that have a "holding" company and a "working" company if those are the correct terms. One of them is one of the larger excavation firms in the area and the other owns just 5 pieces of equipment plus attachments. In addition to the benefits already mentioned, the smaller operator says he gets discounts on his new equipment because it is being bought for a rental company. JD and maybe other manufactures give incentives to get their brand into rental yards. I'll be looking into doing this too when the time is right.
Another advantage to having a seperate equipment company is that "rental companys" typically get paid before contractors in situations where the GC defaults.
The company I work for is a rental/dirt work/gravel pit/concrete work/trucking company. I usually work on the rental gravel pit and trucking company side. All the employees kind of float around where needed. Usually the "rental" part of the company gets the new stuff and when its worn down to nothing then the dirt work and gravle pit gets it.
its all a shell game of sorts u need a good acc to help u decide if it will work for u as a small company the extra payper work may not be worth it but for the big boys it is common
An LLC does not hold you blameless. It only keeps your business assets and personal assests separate.
We do this,mostly for legal reasons.Construction liability is a booming business in southern Nevada.We have so many fly by night outfits coming in from other states,lowballing bids,taking the money,and moving on,that when the homeowners sue for defects,everyone on the job is held liable.Guess that way,at least the "local" wallets are accessible.