UPS store

[Girard Van De Lay]

Need help with this one. Client bought an existing UPS store and paid an upfront fee he has a total cost for the store and then a inventory and consideration cost. Do you take the differance between the two and dep the differance for the actual cost of the business it is about 35,000 dollars? Does anyone else do any of these stores if so what do you normally charge to prepare their return for a SCH C.

Thanks for your help
Girard

[outwest]

This question is really hard to follow..

so I'm just going to lay out the general rule for business purchases.

Start with the total purchase price
Allocate the agreed on amount to inventory.
Allocate the agreed on amount to fixed assets,
The remainder is something like goodwill, noncompete or the like. (Section 197 intangibles)

This is the short version. But this should get you started on the right path.

[S T]

A little insight

I have a client, that purchased under the old "MBE" before UPS took over the franchise.

So there should have been an agreed upon amount, allocated and reported on the 8594 form.

There would be:

Inventory(stamps, postage, packaging supplies)
Equipment
Goodwill
Supplies (maybe, but not likely)
Could possibly be accounts receivable, as many of these locations have mail box rentals.
your t/p could have also taken over existing leases on postage meters, copiers, etc.
Leasehold improvements to location
then since it is a franchise, there is also the franchise fee.
There is more than likely a transfer fee with UPS to take over the franchise,
Security Deposits with Landlord should have been transferred

I would hope that your t/p did a business transfer escrow, so then there would also be escrow fees, possible commisions and closing costs, there would be some sales tax/use tax on the purchase of the equipment value.

And probably more than I am not thinking about at the moment!

Sandy

[Chief]

Insight into Fee Charged

Are the owners keeping their own records and providing you with organized documents that they need for tax preparation. Or is that up to you. All that will determine your fee. How much time will be involved. If they have their own accountant and hand you organized information. that is a different story. For a sch C, self employed person, I would charge in the range of 150 to 300. Probably a little less for an individual who receied an isolated 1040 misc and I used a Cez for that person. But I dont think the UPS store will fit that bill. Probably a 1045, 1120S, an LLC or the like. You need more information before quoting a Sch C fee to them because I dont think that is what you are getting into. You also need to question the availability of a list of capital assets in the UPS store, depreciation previously taken, and depreciation on a continuing basis. Al l if all dont be hasty in working with this client. A client will not be typically be upfront about their situation. Reserve your fee quote until you get a complete picture of what you are undertaking.
Also will the UPS store have employees and need you to do payroll? Also about sales tax and quarterly payment s to the state. You could be talking a fee of 500 to 700. or more. I notice you are from California. You also need to charge for a state return as well in your fee. Since I am from SW Florida I think you should get some idea from California preparers as to what they charge.

[Chief]

Girard

Tell us when you finally discover what you are into. I'll be interested as well as the other poster to your post.

[Girard Van De Lay]

thanks

Thanks for your imput Chief. I am still working through this they do not have employees but they do their own books and this is the first year they are in business so I have to set up all the dep. and I am running into other problems. They bought the business for 150,000 and the value for all the property was valued at 113,000. Any suggestions on how to handle the differnence? The owner broke down all of the different items and their value but it does not nearly equal the 150,000 so I am struggling with this one. To top it all off they call every day to see if it done yet!!

[S T]

Should Be

The seller and the buyer should have agreed and there should be the 8594 form that will give you the breakdown on the asset purchase!

If one was not issued, you need to complete the form and attach to your clients return, it is required. So if there is a difference between asset purchases and the purchase price, it would probably be assigned to goodwill or could be closing costs through a business escrow. Such as escrow fees, sales tax paid on equipment transfer, etc.

Sandy