Startup expences & loss [OHIO]

[MisterOwl]

Good evening,

I started a LLC last year and have several thousand dollars in startup expenses, but have not turned a profit. We're still heavily marketing our services.
Startup expenses include marketing efforts, paid training, and other online tools.

I'm not even close to being out of the red technically, can I still write these items off? Is the IRS more lenient in the first year of a business?
I read that over time if you're not turning a profit they can deem your business a hobby, but I just wanted to make sure since this is only year 1.

Thanks in advance-

 

[LdiJ]

Good evening,

I started a LLC last year and have several thousand dollars in startup expenses, but have not turned a profit. We're still heavily marketing our services.
Startup expenses include marketing efforts, paid training, and other online tools.

I'm not even close to being out of the red technically, can I still write these items off? Is the IRS more lenient in the first year of a business?
I read that over time if you're not turning a profit they can deem your business a hobby, but I just wanted to make sure since this is only year 1.

Thanks in advance-

Have you actually started taking in any money at all yet? I am not talking about profit, I am talking about gross income. Many companies do not make a profit in their first year, and sometimes even in their second, its once you get to the third year where its expected that things will change. However, that is all assuming that you are actually taking in income, even if you don't have a profit.

I once had a client who took in no income at all in his first year, which was pushing the envelope a bit but when he did not take in any income his second year either, I immediately treated it as a hobby because it was clearly something that he had set up for his own amusement rather than an attempt to make a living.

 

[MisterOwl]

Have you actually started taking in any money at all yet? I am not talking about profit, I am talking about gross income. Many companies do not make a profit in their first year, and sometimes even in their second, its once you get to the third year where its expected that things will change. However, that is all assuming that you are actually taking in income, even if you don't have a profit.

I once had a client who took in no income at all in his first year, which was pushing the envelope a bit but when he did not take in any income his second year either, I immediately treated it as a hobby because it was clearly something that he had set up for his own amusement rather than an attempt to make a living.

Thanks for the reply!

As of last year no income. That's changed this year and I don't anticipate a loss for 2019. With that said, do you think it is acceptable to include those deductions for 2018?

 

[LdiJ]

Thanks for the reply!

As of last year no income. That's changed this year and I don't anticipate a loss for 2019. With that said, do you think it is acceptable to include those deductions for 2018?

You will want a local tax professional to look over your expenses to determine if they can be treated as expenses or should be considered start up costs that need to amortized.