How to amortize start up costs

blackfrog

When starting a business, many people incur substantial start up costs. These can be things like legal fees, equipment, inventory, etc. The question is, do you amortize these start up costs over the life of the business, or do you just "write them off" in the first year?

Herminia474

There is no definitive answer to this question since it depends on accounting methods and business circumstances. However, in general, startup costs are not amortized but are written off in the year they are incurred. This is because amortization is a method of spreading the cost of an asset over its lifetime, and startup costs are typically one-time expenses.

cathy_holmes

The answer to this question depends on the situation. If you're starting a business, you may be able to deduct some of your start-up costs. However, if you're acquiring an existing business, the start-up costs may be considered goodwill and not eligible for a deduction.

If you're starting a business, you may be able to deduct some of your start-up costs. The IRS allows you to deduct up to $5,000 in start-up and $5,000 in organizational costs in the first year of business. These deductions can include expenses such as legal fees, marketing expenses, and office supplies. If your start-up costs exceed $5,000, you can amortize the remaining amount over 180 months.

If you're acquiring an existing business, the start-up costs may be considered goodwill and not eligible for a deduction. Goodwill is an intangible asset that arises when one company purchases another company for a price that exceeds the fair market value of the tangible assets. The start-up costs associated with an existing business are generally not deductible as they are considered part of the goodwill.