Timeline for Can I form a company to rent a car or apartment to my wife's employer for her to use?
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| May 20, 2013 at 14:53 | comment | added | JAGAnalyst | That's possible but remember that as an asset management company, you will be taxed on your revenues and will have other business expenses. Additionally, you have to think about maintenance, and depreciation on the car. The rental prices also reflect that a group of assets won't always be full utilized - a signficant number will always be vacant. I see your point that you're willing to accept the assets in whatever shape they are in when they are no longe needed, but practically it's still very likely that the company would prefer to work with a large established vendor. | |
| May 19, 2013 at 3:26 | comment | added | drs | @JAGAnalyst My impression is that in our situation the margins are substantial. Our hotel bill is $3000/month and our rental car is $700/month. If one were to purchase these items, the monthly payments may be a third of these rates. Over six or more months, it seems plausible that I could recoup the turnover costs. Alternatively, I could look to then rent the apartment on the market or bring the car to her next position and set up the same arrangement again. | |
| May 17, 2013 at 18:03 | comment | added | JAGAnalyst | @drs if you don't have any personal involvement that would avoid the appearance that the employer might be somehow paying your wife via your company under suspicious circumstances. However, as littleadv mentioned, you can't offer a competitive rate on one car and one rental. This is not a viable way to end up with a car and an apartment when your wife no longer needs to rent them for work. The margins in these businesses are very low and you need scale to make money. Are you working under the impression that the price rent vs. buy is out of balance or that renting is a "waste"? | |
| May 15, 2013 at 22:50 | comment | added | littleadv | @drs the fringe benefist are the mere rentals for the employee, these are taxable on their own behalf. You should probably ask a lawyer about the rest, as it does seem fishy, but I'd say the fact that its your wife makes it almost certainly a problem. Even if its not your wife, it will be hard to show an "arms-length" transaction, and then you can get in trouble. | |
| May 15, 2013 at 22:21 | comment | added | drs | So the primary problem from a tax and legal perspective is that it is my wife that will be using the assets? If instead it were a friend of mine or one of her coworkers, there would be no tax avoidance or fringe benefit issues? | |
| May 15, 2013 at 18:04 | comment | added | JAGAnalyst | +1. These would be considered taxable fringe benefits. Also, as a practical matter, it's unlikely that your wife's company would agree to use a company that you formed as a vendor, given the potential conflict of interest you and the company would create in relation to your wife. Most companies prefer to sign a volume deal with vendors to get out of these businesses. It's likely the time and expense of running a bona fide asset management company would cancel out any perceived benefits. If your wife doesn't like her options, the company might be open to a simple per diem. | |
| May 15, 2013 at 17:29 | history | answered | littleadv | CC BY-SA 3.0 |