Bringing assets into a business - Segment 4

Transcript

Host: Welcome to the segment called Bringing assets into a business, part of the Starting Your Business video.

I'm your host Janice Novak.

With me is Diane Rice who will share with us, in this segment, information that she has obtained from the CRA to help you understand the issues involved with bringing assets into a business.

Welcome Diane.

Subject matter expert: Thank you Janice.

Host: So I'm a new business owner and I'm in the process of setting up my business. But I have assets that I already owned and I want to use these assets for the business.

Diane, what would be the first step to take in this situation?

Subject matter expert: If, as a new business owner you'd like to take assets that belong to you personally and transfer them to your business, you first have to consider your ownership structure.

Host: Say, I'm a sole proprietor and have assets that I owned personally that I want to use for my business. How would I handle this situation?

Subject matter expert: The transfer of assets as a sole proprietor is a reasonably simple process.

The Income Tax Act requires that you transfer these assets to the business at their fair market value.

Host: Fair market value is a term you hear quite often. What is fair market value?

Subject matter expert: Generally, it's the highest dollar value you can get for your property in an open and unrestricted market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length with each other.

Host: So how does this apply in the case of a sole proprietor transferring personal assets?

Subject matter expert: The CRA considers that the sole proprietor disposed of their personal assets at a price equal to their value at the time they started to use the assets in their business.

Host: And, if the business is a partnership or a corporation, how do I go about transferring the assets?

Subject matter expert: The property transfer rules are different for each type of business structure. Partnership and Canadian corporation asset transfers can be more complex and quite technical in nature.

For more information on transferring assets, go to the CRA's bringing personal assets into your business webpage.

The link is included in the Related links for this segment.

Host: What if I've listened to this video and referred to the information that the CRA has provided and I still have questions?

Subject matter expert: If that's the case, call the Business Enquiries line at 1-800-959-5525.

Host: Thank you Diane.

This concludes the segment on bringing assets into a business, part of the CRA's Starting Your Business video. Thank you for watching.

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