Accounting for expenses for an LLC

Mar 10, 2008 5 Replies
H

Hello,



A friend and I registered an LLC (as equal partners) in August 2007 in Texas. We spent about $1000 (split equally between us) in registration and other start up costs etc. We didn't have any income in 2007.



We had selected Jan-Dec as the accounting year for the LLC.



I would like to confirm that I can put my share of the expenses (about $500) as 'non passive loss' on line 28, column 'h' of Schedule E. That column expects the information to come from Schedule K-1 which requires us to file Form 1065. The only applicable parts of 1065 seem to be page



1, Schedule B (with 'No' for all the questions) and Schedule K-1. Am I missing anything?

Do we need to do anything else for the federal taxes?



Thanks for any guidance you can provide.



Regards,



- Harshal


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B

startup expenses have to be amortized & not currently deductible

whether or not it is passive depends on various factors including your activity in the business & the type of business

-----> real address on hobokeni or hobokenx

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R

You can deduct $5,000 in startup costs.

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P

If the OP and his partner probably haven't started their business yet....(no income was generated). They can't take "start-up" expenses because they haven't yet started their business.

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M

But you have to make an election to be able to do so.

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H

Thank you all for your answers. To clarify, we did not really open for business in 2007 and did not have any income.

I have a couple of follow-up questions:

  1. I understand that because we did not technically open for business in 2007, we can't deduct the operating costs. But it seems like we could deduct the costs of registering for an LLC.

How do we make an election to deduct these costs?

  1. Another option we are considering is to not take any deductions for
2007 at all and fill in all zeros in Form 1065. Submitting the form with all zeros is just to show IRS that we did start the business but did not have any income.

This would really simplify this year's taxes.

Could we then include both the types of costs (start-up costs like registration and legal fees + initial operating/capital costs) in our

2008 tax returns? I am reasonably certain about the latter but not about the former.

Any suggestions?

Thanks again for all your help.

Regards,

- Harshal

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