# 040 Asset Register & Capital Contribution — WFAG LLC

*Status: v0.1 · 2026-05-04*
*Parent: 000 Entity Transition Brief*

---

## Frame

When a sole prop converts to an LLC, the personal/sole-prop assets used in the business have to formally move into the new entity. Done right, this:

1. **Establishes corporate veil** — the LLC actually owns the things it operates with
2. **Sets tax basis** — the LLC takes carryover basis from the sole prop (no taxable event)
3. **Documents legitimate business expenses** going forward (depreciation, repairs, etc. flow through WFAG)
4. **Caps SF Form 571-L exposure** — only what WFAG owns on each 1/1 lien date counts

The mechanism is a **Capital Contribution** (sometimes called "Bill of Sale + Assignment" if you want it air-tight). One-time legal event, then maintain the register going forward.

---

## Asset Categories & Treatment

| Category | Examples | SF 571-L taxable? | Federal treatment | WFAG strategy |
|---|---|---|---|---|
| **Computing** | Laptops, monitors, tablets, phones used for biz | ✅ Yes (FMV on 1/1) | Section 179 expense (up to limit) or depreciate over 5 yrs | Track FMV honestly; old gear is worth pennies |
| **POS / Hardware** | Card readers, registers, label printers, scales | ✅ Yes (FMV) | Section 179 / 5-yr | Same |
| **Production Equipment** | Seed packing tools, mixers, sealers, scales | ✅ Yes (FMV) | Section 179 / 7-yr | Same |
| **Furniture & Fixtures** | Desks, shelving, signage in SF locations | ✅ Yes (FMV) | 7-yr depreciation | Time purchases away from year-end |
| **Inventory** | Seeds, packaging, labels, finished goods, raw materials | ❌ **Exempt** in CA (held for resale) | COGS when sold | Hold inventory through 1/1 lien date — exempt anyway |
| **Vehicles** | Any business-use vehicle | ❌ Taxed via DMV separately, not 571-L | Standard mileage or actual expense | N/A unless owned |
| **Software & SaaS** | Adobe, Notion, Shopify, accounting | ❌ **Exempt** (intangible) | Expense as paid | No 571-L exposure |
| **Domains** | All Namecheap holdings | ❌ **Exempt** (intangible) | Capitalize or expense | No 571-L exposure |
| **Trademarks / Trade Dress** | "Mr. Bloom's", "Plant Native Plants Club", recipes, logos | ❌ **Exempt** (intangible) | Capitalize | No 571-L exposure |
| **Customer Lists / Brand Goodwill** | Email lists, IG audience | ❌ **Exempt** (intangible) | Capitalize | No 571-L exposure |
| **Real Estate** | None currently | ❌ Taxed separately as secured property | N/A | Lease only for now |

---

## Why the SF Exposure Is Lower Than It Feels

The instinct "I don't want to pay tax on my computers and POS" is right to optimize, but the math is usually less than feared:

- **CA exempts inventory.** Inventory held for sale is not subject to 571-L. For a product business, that's the bulk of asset value.
- **SF exempts under $4K total.** SF City Ordinance 308-97 — if your aggregate non-exempt FMV is under $4,000, no tax. Most micro-businesses sit below this once you remove inventory and intangibles.
- **Depreciation is real.** A laptop bought 3 years ago is worth maybe 20–30% of acquisition cost at FMV.
- **Lien date timing.** Only what WFAG owns on January 1 counts. Sole prop's 1/1/26 ownership is the sole prop's problem.
- **WFAG starts clean.** First WFAG lien date is 1/1/27. You have 8 months to plan that picture.

The Form 571-L assessment is at **1.17143563%** of taxable value (FY 25-26 unsecured rate). On $4,000 of taxable property, that's $46.86/year. Worth filing accurately, not worth optimizing pennies of.

---

## Capital Contribution Mechanic (Sole Prop → WFAG)

To formally transfer assets from Shalaco's sole prop to WFAG:

1. **List the assets** — populate the Asset Register below with each item, FMV, and acquisition cost.
2. **Sign a Capital Contribution Memo** — short doc reciting that "Member contributes the following assets to WFAG LLC in exchange for membership interest, valued at $X total, with carryover basis of $Y." A business attorney can stamp this in 30 minutes.
3. **Update the Operating Agreement** — capital account reflects contributed value.
4. **Adjust books** — bookkeeper records assets on WFAG's balance sheet at carryover basis; depreciation continues on WFAG's books.
5. **Update titled property** — vehicles, equipment loans, leases — retitle to WFAG (rare at this scale; most assets aren't titled).
6. **Save the memo** — `/Wild Futures Advancement Group LLC/Asset Transfer Memo.pdf` + Notion mirror.

> Tax note: Contribution of property to a wholly-owned single-member LLC is generally not a taxable event under IRC §721 (treated as continuation since SMLLC is disregarded). CPA confirms.

---

## Asset Register — Working

> Replace placeholder rows with actual inventory. Have J7 / Phoenix run depreciation schedules from acquisition cost.

### Tangible — Hardware

| Item | Acquired | Acquisition Cost | Est. FMV (1/1/27 target) | Location | 571-L Category |
|---|---|---|---|---|---|
| *(placeholder)* MacBook Pro | YYYY-MM | $— | $— | SF | Computing |
| *(placeholder)* Square Reader / iPad POS | YYYY-MM | $— | $— | SF | POS |
| *(placeholder)* Label printer | YYYY-MM | $— | $— | SF | Production |
| *(placeholder)* Seed mixing/packing equipment | YYYY-MM | $— | $— | SF | Production |
| *(placeholder)* Shelving / fixtures | YYYY-MM | $— | $— | SF | Furniture |

### Tangible — Inventory (exempt from 571-L)

| Item | Cost basis | Notes |
|---|---|---|
| *(placeholder)* Native wildflower seed stock | $— | Track by SKU in batch tracking |
| *(placeholder)* Packaging materials | $— | |
| *(placeholder)* Labels / printed goods | $— | |

### Intangible — Brand & IP (exempt from 571-L)

| Item | Status | Notes |
|---|---|---|
| Wild Futures Advancement Group LLC name | ✅ Filed CA | |
| Mr. Bloom's wordmark | ❌ TM not filed | Trademark counsel candidate |
| Plant Native Plants Club | ❌ TM not filed | Trademark counsel candidate |
| Plant Native Plants Alliance | ❌ TM not filed | Trademark counsel candidate |
| SFinBloom | ⚠️ Personal — not WFAG asset | Per Brand Architecture working notes |
| Recipe / mix formulations | Trade secret | Document custody chain |
| Customer email lists | Asset | |
| IG @sfinbloom audience | ⚠️ Personal account, mixed asset class | Decide attribution |

### Intangible — Domains

*(see `001 WFAG Business Info Card.md` for full list)*

### Intangible — Software / SaaS

| Subscription | Annual cost | Renewal | Migrate to WFAG billing? |
|---|---|---|---|
| *(populate from current expense list)* | | | |

---

## Strategy Summary — "Play Fair, Minimize Exposure"

1. **Be honest on FMV.** Don't lowball; the assessor's office isn't fooled, and audit is worse than honest exposure.
2. **Use the $4K low-value floor.** If aggregate WFAG-owned tangible non-inventory is below this on 1/1/27, no 571-L due.
3. **Lean into intangibles.** Software, IP, brand, customer lists, domains — none of it is 571-L taxable. Most of WFAG's actual value already lives there.
4. **Time large fixed-asset purchases.** Buy after 1/1 each year, not before, to avoid that asset showing up on lien date.
5. **Section 179 / Bonus Depreciation.** On the federal side, expense qualifying property fully in year of purchase (subject to limits). Reduces federal taxable income, doesn't change SF 571-L value much (which is FMV-based, not basis-based).
6. **Keep the register current.** Once a quarter, update FMV. Bookkeeper-friendly task.
7. **Don't move assets between WFAG and personal use** without documentation — that's where corporate veil gets pierced.

---

## Decision Log (this doc)

| Date | Decision | Rationale |
|---|---|---|
| 05/04/26 | Use Capital Contribution mechanism for sole prop → WFAG asset transfer | Standard, non-taxable, preserves carryover basis |
| 05/04/26 | WFAG bears no FY 25-26 SF 571-L liability | Formed 04/20/26, after 1/1/26 lien date |

*(append as decisions land)*