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Stephen G.
Stephen G., Sr Financial Expert
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Experience:  Extensive Experience with Tax, Financial & Estate Issues
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can I begin to document business expenses prior to establishing

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can I begin to document business expenses prior to establishing an LLC? I noticed on the LLC application, there is a option for, 5 days prior the date of receipt and up to 90 days after the date of receipt to begin your effective date.

So to clarify, If I'm starting a new business in the middle of the year, is it better to wait to start the effective date? and when can I start documenting max business expenses?

Stephen G :

There's no reason to defer the effective date.

Stephen G :

The best date would be when you are in the process of setting up your business.

Stephen G :

Once you have the business established, you'll have more options as to how you treat your expenditures.

Stephen G :

If you are the sole owner (member) of the LLC, you will be able to simply file a Schedule C with your personal tax return to report your business activity.

Stephen G :


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Customer: replied 3 years ago.

Sorry, I did have another question, If I have been purchasing tools and supplies just prior to (like a month) the effective date and I utilize those tools and supplies for the new business, can I effectively count those expenses towards the business?

Yes. That's no problem. You can expense them under a business policy to expense "small tools", say anything less than $250. or they can be expensed for tax purposes using the "Section 179 Expense Election" which allows you to immediately expense any equipment you purchase during the tax year. There are high limits on the total amount you can expense in any one year. You would list the items on Form 4562 to make the expense election. One caveat is that you can't deduct the 179 expense if it creates a loss for the year. Hopefully that's not a problem. You would be able to carryforward the deduction to a year when you have a profit.
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