s corp with no income

[theresa d]

i have a client that incorporated in october 2004. she had hoped to do health care related consulting. she was available for business as of october 2004 and has actively advertised and developed contacts but has not generated any income. she has 5000 in expenses for 2005. can a loss be taken with no income? or would the expenses be considered start up cost, even though the business has been in operation, however unsucessfully for a year?

i thought the loss would be allowed, however i just read something indicating the irs takes the position a business is not in operation until it generates income and the expenses are considered start up until income is generated. any thoughts?

p.s. i told her not to incorporate until she was sure the business would work-she didn't listen. the 5000 does not include true start up cost such as legal fees etc.

[Bird Legs]

S Corp. Loss

If the expenses that were deducted are legitimate business expenses there should be no
problem. Just because there was no income does not mean that the client was not trying
to generate income.

[OldJack]

One of the reasons to elect S-corp status is when you expect to lose money in the first few years of a startup business so the loss can be deducted on the 1040. Loss is not problem as long as it does not exceed the shareholders basis in the corporation.

[theresa d]

thanks so much

i started to second quess myself on this one. not having a good day. thank you, thank you for for reinforcing my decision.