The IRS allows you to deduct start up expenses in the year you are open for business but did not generate any revenue. Strat up costs are the costs incurred prior to the opening of the business. Once the business is open, any expenses incurred are operational expenses.

Federal tax laws allow LLCs to deduct initial startup costs, as long as the expenses occurred before it begins conducting business. A business is considered active the first time the company's services are offered to the public. The IRS sets a $5,000 deduction limit on startup and organizational costs. A business can deduct the amount paid for product creation and research from their taxes. For example, fees paid to survey potential markets would qualify as tax deductible.

Write Off Expenses Include:

• Attorney and bookkeeping costs
• Licenses, permits, and other fees
• Market and product research
• Advertising costs
• Website development
• Building or office space lease expenses and utilities paid prior to opening the business
• Business equipment that is rented
• Employee training expenses
• Costs associated with finding financing, suppliers, customers, or distributors.

Startup costs: Understanding the totals, taxes, and timing