Starting Your Business/Keeping Records
What are Business Expenses
Start-up Costs Start-up costs are costs for setting up an active trade or businessor investigating the possibility of creating or acquiring an active trade or business.Start-up costs include any amounts paid or incurred in connection with an activity engagedin for profit and the production of income in anticipation of the activity becoming anactive trade or business. To be amortizable, your start-up cost must meet the following tests. - It must be a cost you could deduct if you paid or incurred it to operate an existing trade or business.
- You must pay or incur the cost before you begin your business operations.
Start-up costs include what you pay for investigating aprospective businessand getting the business started. They may include costs for thefollowing items: - A survey of potential markets,
- An analysis of available facilities, labor, supplies, etc.,
- Advertisements for the opening of the business,
- Salaries and wages for employees who are being trained, and their instructors,
- Travel and other necessary costs for securing prospective distributors, suppliers, or customers, and
- Salaries and fees for executives and consultants, or for other professional services.
Start-up costs do not include deductible interest, taxes, and research and experimental costs. SeeResearch and Experimental Costs.
How to Amortize
Important References:
Publication 535 Business Expenses
Form 4562 Depreciation and Amortization
Instruction for 4562 |
