Renting your equipment to your business

I was wonder if it's better to buy the equipment and rent it back to your business ?

Anyone have first hand information of the Pro's and Con's. Thanks

I'm no accountant, but here's what comes to my mind.

Plan A: You (personally) buy a camera for $2000. You can't write it off, because you're not a business. Your business rents the camera for $100/month and takes a $1200 write off. You (personally) have a $1200 income for the year, so you have to declare that as income and pay taxes on it. You got nowhere other than losing the depreciation on the camera because your business doesn't own it.

Plan B. You (Personally) start a camera rental business, so you can depreciate that $2000. You do the same thing. The net result is the same as if your photo business bought the camera.

So I don't see the point, but maybe a CPA would. Mine's never suggested I do it this way though.

Dave

In addition to what Dave suggested (and I, also, am not an acct. or CPA), is that if your business is a sole proprietorship, renting it wouldn't make any difference anyway.

Thanks for the input I didn't think it sounded like a logical idea

It all really depends. If you are only a sole proprietorship then the answer would be, it's a waste of time since you probably aren't making enough money to worry about it. The other answer would be because you are still a sole proprietorship and not being protected through incorporation you have no reason to look into something like this.

If your curious about the situation, look into capital leases and operating leases. Answers to your questions lie in those two areas which are apart of broader heading of Leases (and not a lease you signed on your apartment which you live in).