East Bay Business Daily

I haven't incorporated my start-up yet. Can I take tax deductions on my biz expenses paid before incorporation?

I haven't incorporated my business yet, but I have already started paying expenses related to my business. When I file my taxes (Schedule C), can I take deductions on the expenses that were paid before my company was incorporated?

Public Comments

1. If those were not expenses of the corporation, those were personal exenses of your business and should be deductible on schedule C on your individual tax return. Anything that was a business expense of the corporation would be a deduction of the corporate return.
2. It is not required that you incorporate to file Schedule C (Form 1040) as self employed business. Any expenses before the start of a business are not deductible. They must be amortized. Are you taking about LLC or a Corporation (C or S)?
3. Answers above are great- but if your expenses are associated with starting the business (organizational costs, etc.) they may not be deductible yet.
4. If you incurred expenses while in the process of building a business, they are tax deductible (on schedule c). It does not matter if you have have decided on a business structure or not.
5. The expenses would not be deductible on your Form 1040 Schedule C. The expenses are deferred expenses of the corporation. Once you begin operations of the corporation you can elect to amortize the deductions over a period of 60 or more months. ( Internal Revenue Code Section 195). If you completely abandon the idea of incorporating your business than the expenses would appear to be deductible when the idea is completely abandoned. If not already deducted, the expenses would then appear to be deductible under IRC Section 165 as a loss.