There are so many people who ask the question, how to calculate total assets for tax purposes, or even for other business purposes such as how much your business would be worth if it had no debts. All you really need to know when you’re looking at your business as a whole is how much of your assets you own and the amount of your debt.
The first thing you have to know when you need to know how to calculate total assets for tax purposes is that, depending on the accounting formula used to calculate them, total asset must equal the amount of the value of total liability and owner’s equity. Total Assets = Total Debt + Owner’s Equity + Interest on Debt. That’s the way you have to figure this out.
Now, let’s assume you’ve got two separate companies. One has debts and is considered an S corporation, while the other one is a partnership and its assets aren’t owned by any of its partners. So what is their combined value?
In the first case you’ll get the answer: total asset x total liability. It could also be divided between the two companies (or each of the two companies and some third-party), but you won’t need to. In the second case, the formula will be different.
If you divide assets between the two companies, then the answer will be less than you’d get if the two companies are combined into one. This is because if one of the companies becomes insolvent, the value of assets for that company will be less than the value of assets for both companies combined. So the total value of the two companies will be less than the combined total value of the two companies.
Total assets are actually very easy to figure out. You just take a look at your books and see how much of your assets you own and the amount of your debt. For each asset you own, write down the amount of the total value of your assets, then multiply that number by your assets and debt.
Remember that there can be negative values on assets, and vice versa. So, a loan that you took out and the value of your asset is -$2, but the debt on the loan are not that much, it would still be included in your asset value, even if the value of the loan is more.
Assets don’t usually go away. They’re there when you start making money, and they disappear when you stop making money. So when you’re figuring out how much of your assets you own, take into account all the factors that can have a negative effect on your cash flow.
The amount of your current assets can be figured out by looking at the balance sheet of each of your companies. The balance sheet shows how much of your assets your companies owe versus how much they have already paid you. So, if you have more debt than assets, it would mean you’re paying too much to keep the balance low. A balance sheet is a good way of determining how much of your assets you own and the amount of your debt.
When figuring out how much you owe versus how much you have, you should also consider how much of your assets you own. is part of your future income, so subtract it from current assets. to figure out your net worth.
Net worth also includes the value of your tax-deferred long-term investments. Long-term investments such as retirement accounts and tax-deferred stock options are only important for the moment you’re paying them out. You don’t need to include these in your net worth calculation because they aren’t usually “real” assets.
If your tax deferred savings are also tax-deferred, then they are also part of your net worth, but they won’t stay long-term unless you have a plan for paying them out. The value of these will grow over time, since you can earn interest or dividends on them.
