Business Startup

[geekgirldany]

I hope you do not mind me using your thread to ask a question.

New client I am meeting with later today said he is a manager for a singer. Spent expenses to get the singer started in 2012 but there was never any gigs.
I will need to double check some facts but I believe he did not open an business bank account until 2013. He did say he register a LLC in 2012 for the business and would like to later on (possibly 2013) file to be considered as a S-Corp.

Would the business be consider to start in 2012?
I suppose it comes down to if he was actively seeking gigs for the singer or if was just publicizing him.

Would appreciate any advice.
Thanks
D

[Golden Rocket]

How much money??

How much was spent in "Start-Up" costs? If not over $5000, I don't think you are required to capitalize.

I wouldn't hesistate to report it and take the loss in 2012 if this is a serious bona fide activity. Don't ask me for a definition of this, because it is very subjective and you are more knowledgeable about your client than anyone else. Of course, your client will claim so and is already counting their millions.

If your client is typical, there is a good chance there will be losses in 2013, 2014, and beyond. I hope he is remarkably successful but there are good many who are not. The deductions for mileage, equipment, advertising, etc. will often overwhelm performances for money. These are not "hobby" losses either because there is every intent to be profitable.

For every musician who sings at Carnegie Hall, or even at the Fox Theatre in Atlanta, there are dozens who sing at the Dew Drop Inn Honky Tonk. The Honky Tonkers would not report a profit even if they reported anything at all. And then there are others whose singing never gets off the front porch.