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03 - Buying a Business Making a Business Investment or Acquisition
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  #1  
Old 05-01-2005, 12:19 AM
ScreenArtist ScreenArtist is offline
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Default Valuing Sweat equity

I am going into a joint venture where my business will be providing sweat equity.

How do I actually value the sweat equity investment?
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  #2  
Old 05-04-2005, 12:13 PM
smixel smixel is offline
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Same as you would as if you were being paid.

Kent Capener
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  #3  
Old 05-04-2005, 02:28 PM
OldJack
 
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There is NO such term as sweat equity in the Internal Revenue Code or Generally Accepted Accounting Principles (GAAP). The idea of sweat equity is real, but not recognized as having investment value by law or by accounting standards organizations.

For tax purposes your investment is zero unless you receive taxable compensation for your services and reinvest the compensation thereby giving you investment basis dollar amount.

The only recognition on financial statements might be in a footnote disclosing your obligation to perform certain services by agreement or contract with other parties. Any other recording of an amount as an investment or equity on financial statements could lead to lawsuits, for misrepresentation, from loan institutions or from other investors.

edit comment: Depending upon your method of accounting your actual cost associated with providing the services could be capitalized (rather than expensed) as an investment cost and shown usually as an investment asset in the "other asset" classification.
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  #4  
Old 11-13-2005, 09:30 PM
TJ-Lord TJ-Lord is offline
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I am in the same boat. I have sweat equity. The way I look at it I would be given a salary of a certain dollar amount hourly or monthly instead of me getting the paycheck I would get no paycheck and the value of my time would be equal to that of the pay had I gotten paid. Plus incentives also.
I don't know why it is so hard to find someone to invest and let someone else do all the hard stuff. They would be profiting from it as well.
Anyone knowing of anyone wanting to invest in a sure thing that will also qualify for funding from the government itself and save them some money then please let me know.
Good luck to everyone on all your ventures.
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  #5  
Old 11-13-2005, 09:48 PM
OldJack
 
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Quote:
Originally Posted by singlemom
I am in the same boat. I have sweat equity. The way I look at it I would be given a salary of a certain dollar amount hourly or monthly instead of me getting the paycheck I would get no paycheck and the value of my time would be equal to that of the pay had I gotten paid.
Take the paycheck.. pay your taxes on the income... reinvest whats left and you will have real equity. no sweat.
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