Start Up Costs…Not What You May Think!

Gabriella has taken a box of receipts to her accountant and is asked if these are start-up costs, organizational costs or business expenses.  Gabriella looks like someone just hit her over the head and she is seeing stars.  She didn’t know there were so many ways she would have to keep track of her expenses.

Business start-up costs are those expenses incurred before the day Gabriella actively begins her trade.  These could be expenses for advertising, payroll for employees that need to be trained, any instructors that are paid, travel and miscellaneous costs that are incurred for meeting with vendors and other suppliers as well as fees for professional services.  This could also include costs associated with due diligence when purchasing an already established business.

Gabriella looks through her receipts to find the documents for her organizational costs.  She pulls out invoices that are for the cost of incorporating in her state, the legal services of an attorney that helped her set up the company and the permit receipt for her local area as well as the filing fees.

The remainder of the receipts for other business expenses will have to be divided between regular deductible items and capitalized items.  This will be discussed tomorrow.

Now that Gabriella knows the different categories of her expenses, she can make better decisions when making purchases and understanding how they will affect her tax liability.

If you need to know more about how to run your business more efficiently, contact Excerebus CPA Firm at or 407-988-5647.

Categories: Tax Information

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