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How should I account for C-Corp startup legal costs paid from personal account?

I like Dana’s suggestion as to an easy and efficient way to reimburse startup costs. One helpful thing worth mentioning is what constitutes as startup costs? This is taken from IRS Publication 535 – Business Expenses:

Business Start-Up Costs

Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business.

Qualifying costs. A start-up cost is amortizable if it meets both of the following tests.

  • It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into).
  • It is a cost you pay or incur before the day your active trade or business begins.

Start-up costs include amounts paid for the following:

  • An analysis or survey of potential markets, products, labor supply, transportation facilities, 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.
  • Salaries and fees for executives and consultants, or for similar professional services.

Nonqualifying costs. Start-up costs do not include deductible interest, taxes, or research and experimental costs.

If you’re interested in consulting with an experienced startup attorney regarding your situation feel free to check out LawTrades. We’re in the business of helping small businesses secure legal advice that they need for a low cost.

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