When does my business officially start if I form a corporation?
Your business officially starts when the business begins operations. For a service or consulting company, that means providing services. For a retail store, that means when the doors open. You do not have to generate income or sales on the first day of operations, but you must be operating the business so that you can generate income. It is important you determine when the business starts because you treat all costs you incur prior to that time as start-up costs or organization costs. You must amortize these costs over five years starting when the business begins operations. Some examples of start-up costs include surveys of potential markets, advertising the opening of the business, and professional fees paid in connection with starting the business. Once you begin normal operations, you can deduct normal operating expenses as they occur.
Jeff Heimler, CPA, owns Heimler & Associates, CPA. You can reach him at (949) 252-8192(949) 252-8192.
Have a question for a CPA? Ask it here.