Start-Up Expenses

[hobartsmith]

In regards to a sole proprietor who starts up a new business (a service business that requires licensing) in March of 2006 are all expenditures incurred before potential clients come aboard are considered start-up costs that must be amortized (unless the election is made to currently deduct up to $5,000 in start-up costs) or are only items such as business regisration costs and other one-time only, beginning of the business expenditures considered start-up costs?

Thank you.

[veritas]

First establish the day the business began

The startup costs begin before the business started not necessarily before the customers came on board.

[Bird Legs]

Start up expenses

See TTB page 8-17.

[jainen]

intangibles

>>items such as business registration costs and other one-time only, beginning of the business expenditures <<

Start-up costs are operating expenses that would be normally deductible if the business were open, like rent and utilities, supplies, wages, insurance, and so on. Businesses can elect to deduct/amortize such costs incurred before the day of opening.

Organizational costs are things like registration and legal fees. Corporations can elect to deduct/amortize organization costs, but other businesses can only capitlize them as non-depreciable intangibles.