From the commercial roof over your head to the ergonomic chairs beneath you, every business will acquire certain assets that generate either short or long-term value.
By correctly identifying and classifying the types of assets you own (or plan to own), you’ll not only stay in compliance with the IRS, but you’ll also be able to balance and manage your financial priorities over time, which in turn, will lead your business toward long-term success.
In this article, we’ll review what business assets are and how they’re classified, so you’ll have a deeper understanding of how they can benefit your company’s future.
Types of Business Assets
Depending on the type of business you have, or the size of your company, your business assets may vary. But assets typically fall into one of two primary categories:
- Tangible Business Assets – these represent the physical assets you own (e.g., company vehicles, office buildings, computers, software, equipment, business furniture, cash, etc.)
- Intangible Business Assets – items that aren’t physical—meaning you can’t touch them like a building or car—but they provide long-term value to your company that you can capitalize on (e.g., trademarks, patents, copyrights, licenses, reputation, etc.)
Next, your assets are divided into one of two other categories for tax and accounting purposes:
- Current Assets: Assets that your company plans to turn into cash within a year’s time. This might include cash, inventory you plan to sell, or debt you’re owed. These are all considered current assets.
- Non-Current Assets: Also referred to as capitalized assets (or fixed), these are items you own that will return value for your company over time (more than a year). This may include real estate or heavy-duty equipment.
Why Are Business Assets Important?
Assets are items of value that can be exchanged for cash, which means they can help demonstrate your company’s financial status (i.e., net worth), as well as help provide a safety net for the future of your business and retirement.
Assets also provide excellent collateral, especially if you’re considering applying for a business loan to expand your current operations.
However, if you’re not taking stock of your assets or classifying them correctly, you could be putting your company’s future at risk. Let’s also not forget that certain assets can devalue overtime—due to wear and tear of equipment or market fluctuations. So, if you’re not keeping tabs on how your assets are working for you, you could be losing money.
This is why asset management is essential!
Manage Your Business Assets with Focus Financial
At Focus Financial, we’ll help you keep track of your business assets and strive to ensure you always stay in compliance with the IRS. By developing an effective asset management strategy, we’ll provide you with a comprehensive financial plan that aligns with your future goals and keeps your business in good standing.
To get started, use our location tracker to find an advisor near you. From there, you can schedule a consultation with one of our professionals and start getting the financial guidance you need to protect your business today and in the future.