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Start-up business tax/accounting questions...

My partners and I started a business midyear '06. The business is not operational and still in the planning stage. We have incurred minimal expenses thus far:

5/26/2006 11.18 Godaddy (Annual Domain Name Fee + 2 months of server space/DB access) 7/14/2006 48.51 NOLO LLC Book 7/27/2006 188.99 Turnkey Web Tools 7/26/2007 3.99 Godaddy (Server Space charge) 8/5/2006 47.72 Best Software Accounting 8/9/2006 44.98 1 & 1 Internet (3 Mo.) 8/23/2006 203.86 Windows XP Pro (2 Copies) 8/30/2006 5 Google Book 9/21/2006 45 Registered Agent Fee 10/30/2006 120 Certificate Of Formation Fee 11/8/2006 44.98 1 & 1 Internet (3 Mo.)

764.21 Total

Us three partners have each incurred 1/3 of the cost equally.

Questions:

1.) How would I classify/post these expenses for internal accounting purposes?

2.) Does the business have to file a tax return even though we are not operational? The business is registered in Deleware as LLC.

3.) Do these expenses incurred trickle down to our personal tax returns and reduce our taxable income?

Thanks,

Joe

Reply to
dickens
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IF I remember correctly, you have to defer start up costs over the first three years. So, when you open for business, you take all those costs, divide by 60, and deduct that number as an expense for the first 60 months you're operational.

The answer to the third question probably depends on how your business is structured.

Reply to
Angrie.woman

You have a choice for amounts paid in 2006 (anything paid after

10/22/04 actually).

  1. Either you deduct the cost over 60 months Or

  1. You can deduct up to ,000 in organizational expenditures and start-up costs. Anything in excess of ,000 needs to be deducted over
15 years
Reply to
jmolino

That's true, section 195 allows expensing of up to $5000 but only if the election is specifically made when you file your taxes this year, if you don't make the election, you must amortize over 180 months.

Reply to
2BACPA

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