How to deduct start up costs

For Federal tax purposes, LLCs do not exist. They are taxed as a partnership (or disregarded if a single-member LLC) or as a corporation.

Perhaps that will help you decide the proper cost allocation method.

Exactly right - as long as an election to be taxed as a corporation was not filed.

The LLC will be appear as a new Sched C business, separate from the old proprietorship. Is that enough to make it eligible to deduct startup expenses?

According to IRS Publication 535,

"Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized."

It goes on to say,

"For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. The costs that are not deducted currently can be amortized ratably over a 180-month period. The amortization period starts with the month you begin operating your active trade or business. You are not required to attach a statement to make this election. You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. "

No. It is the same business and start-up costs can not be deducted. However, the items being discussed are not start-up costs.They are organizational costs. Under Sec. 263 and its regulations, they must be capitalized over 180 months unless the taxpayer makes an election to expense them (if eligible). In this instance, the amount is