Need somebody to answer a question on dollar value of personal assets

[The Content Bloke]

Hi everybody.

The following question has been posed to me:


Why does a business need to apply a dollar value to your personal assets being transferred to a new business?

I've searched the Net high and low for the answer to this question but haven't been able to find anything definitive. The only answer I've been able to come up with -- and it's probably wrong -- is the dollar value of the personal assets will add to the net worth of the new business.

Can anyone please enlighten me as to what is the correct answer to this question?

Many thanks!

[vangogh]

I'm not really sure what the answer to your question is, but I wanted to respond to help keep your thread active. I would think adding to the net worth of the new business is as good an answer as any. I'm not entirely sure why personal assets enter into the equation though. I would think they'd be kept separate from the business assets, unless we're talking about a single owner business where the two might be considered the same.

Sorry I can't be of more help, but hopefully I've managed to get someone else to notice the thread.

[The Content Bloke]

Thanks for responding.

The question is part of an assessment for a business course I'm doing. I've scoured all of the study material and, as I already mentioned, the Web for the answer without success. The only thing I can do is give them what I think is the right answer, even though I don't fully understand the question.

[DeniseTaylor]

Hi There

Perhaps this is the same answer as the others, but I'm thinking it could be a collateral issue and or clarifying what personal assets will be tied to the business. This could help the owner create a stronger image if loans are needed.

However, those items may be at risk if the business fails, if they are name as property. But it could also provide a snapshot of backup funds, should the business need help with start up or lean times.

[Paul]

Hi everybody.

The following question has been posed to me:



I've searched the Net high and low for the answer to this question but haven't been able to find anything definitive. The only answer I've been able to come up with -- and it's probably wrong -- is the dollar value of the personal assets will add to the net worth of the new business.

Can anyone please enlighten me as to what is the correct answer to this question?

Many thanks!

It’s really an accounting question and an accountant can better answer this than me but yes, the assets may increase the value of the business and it may also affect other parts of the financial statement like “paid in capital” or “owners’ equity”.
If you transfer $ 5,000 worth of assets to the business it is the same as if you invested $ 5,000 cash. If you invested the cash then the business would purchase the assets which would be a “capital purchase”.
Depending on the situation and size of the investment it may or may not have a significant impact on you or the business.