Forums: Discussions for entrepreneurs and small business.

I just joined so I may be asking a question that has already been asked.  As an individual I own thousands of books.  I would like to begin selling them on the web.  What portion of the sale goes to the "business" versus me?  What is the best way to set this type of situation up?  Any advice is greatly appreciated.
Thanks!

Are you in the business of selling books?  If not then you are just selling off personal assets.

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Steve Mann
Internet Videographer
MannMade Digital Video
My Email

I am considering making it a business.  If so, how do the preexisting books I own transfer to the business inventory?

Sell them to the business for a penny.

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

If the business is going to simply be a sole proprietorship, no need to "transfer to the business inventory." Simply sell the books as you would if you were selling them personally. Then report income on Schedule C.

I could be wrong, but I don`t see many liability concerns with an online book marketing business that would necessitate forming an LLC or corporation.

Sole proprietorship seems like a good way to go in this scenario to me.

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Accounting Made Simple | Sole Proprietor Tax Guide

In order to properly compute your gain or loss from you "business activities" (I put that in quotes because you really need to make sure this isn`t just a hobby), you will have to determine the FMV of your books on the date of transfer to your business.  Then, if you sell your books for more than their FMV you will have a gain; otherwise you will have a loss.  Most people who sell their used books online have a loss.  This is why I would be very concerned about your profit motive.

Simply reporting all your income on Schedule C will deny you any benefit of the cost of your inventory.


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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

So, I have to determine what FMV is.  This seems very arbitrary.  It seems like something alot of people would determine after the sale.  If I know the actual cost of an item that I paid personally does this factor into the business` "cost" of the item?

In your case, FMV of books, could be determined by looking at the same exact title online to see what it`s being sold at, "on the date that you converted it to business property" - that would be your FMV. 

Most books, with obvious exceptions like leather bond classics, depreciate in value instead of appreciate in value.  Because of this, your FMV is likely to be less than your original cost.  In addition, your sales price is likely to result in less than your FMV.  This means that it is very likely that your "business" will result in losses only.

This is the reason why I stated that for a business of your type, you really need to have a sound business plan and profit motive and it better be in writing.  The reason it needs to be in writing is because it will be the first thing an IRS officer asks for if they decide to audit you under the "hobby loss rules".


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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

why would you want to go through the trouble, expense and probable tax impact to set it up as a business of any type?  after you sell all the books, are you going to then shut down the biz or buy more books to sell?  just sell them personally and put the money in your pocket.

If the OP (original poster) was correct in that he/she has "thousands of books", then two thoughts run through my mind:

1. This poster may actually have some rare books, which may have appreciated in value.  Even with this though, it`s hard to believe the OP will have enough of these books to show a profit for the business as a whole.
2. The OP may be considering setting up an online business not unlike Amazon use books selling and purchasing business, and using his/her original set of books as the beginning inventory.  Obviously, in this case, the OP will also either purchase more books or have others sell their used books through his/her site for a commission.
   

The OP may be way better off if he/she set up a private foundation or other tax-exempt entity, whereby either the books themselves and/or the proceeds from the sale of the books could go to those in need.

The poster may also find, that it is much easier and less paperwork if they just donated their books to a local library.  I actually donated over 100 of my old books to my local library last month and it felt great.  They put some of them on their bookshelves and the rest they sold, as they are trying to raise money to build a new library.



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Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com