Business assets give your company value. Although tangible assets such as physical property are the most obvious type of business asset, your company most likely also owns intangible assets such as strong customer relationships that bring in ongoing sales. Although many intangible assets aren't typically listed on a balance sheet, they nonetheless have worth and can figure into the equation if you're applying for financing or listing your business for sale.
What Are Business Assets?
Business assets are everything your company owns. A business is a legal entity similar to – and different from – a person. As a legal entity, a business owns the money in its bank account and the equipment and inventory it has purchased to manufacture the products it sells. It is important to understand the value of your company's assets because this information helps to provide a clear picture of your company's financial situation. For example, if you have no money in the bank but you've invested heavily in equipment and leasehold improvements, a list of assets shows that you own something of value even if it isn't cash. A list of assets that shows plenty of valuable equipment and leasehold improvements also helps explain why you find yourself short on cash.
How to List Business Assets
The best way to list business assets depends on the purpose of the list, although there are legal conventions that govern certain types of asset lists, such as those compiled to address debt or bankruptcy situations. If you're looking to sell your business or find investors, it makes sense to include everything that can reasonably be construed as an asset; if you're shielding yourself from creditors, you don't want to make your assets look more valuable than necessary. Either way, your asset list should be credible, and you should be able to justify your decision to include or omit any particular item. When listing large pieces of equipment that you are depreciating or writing off over a period of time such as five years, list the value of the asset as the portion that you haven't yet depreciated. When listing assets, arrange them in groups such as tangible, intangible and intellectual property.
Examples of Business Assets
Cash is an obvious business asset, but accounts receivable and work you have already performed for which you are expecting payment are also assets. Equipment is a long-term asset, but inventory or stock on hand is an asset with value as well. Both the inventory you've purchased to resell or use in your products and the inventory your company has completed but not yet sold are classified as assets. Intangible assets include proprietary lists, formulas or processes and brand names or trademarks.
- Bplans: What Are Assets?
- Findlaw: Valuation of "Intangible" Assets
- Internal Revenue Service. "Publication 544 (2019), Sales and Other Dispositions of Assets." Accessed Aug. 11, 2020.
- Securities and Exchange Commission. "Beginners' Guide to Financial Statement." Accessed Mar. 31, 2020.
- Internal Revenue Service. "2019 Publication 946: How To Depreciate Property," Pages 3-5. Accessed Mar. 31, 2020.
- Internal Revenue Service. "2019 Publication 535: Business Expenses," Pages 29-31. Accessed Mar. 31, 2020.
- Internal Revenue Service. "2019 Publication 535: Business Expenses," Page 31. Accessed Mar. 31, 2020.
- Ferrari. "Brand Finance Global 500 Names Ferrari as the World's Strongest Brand for Second Consecutive Year." Accessed Mar. 31, 2020.
- Securities and Exchange Commission. "Exxon Mobil Corporation." Accessed Mar. 31, 2020.
Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.