Bookkeeping

What account should I put entity formation fees

What account should I put entity formation fees for an llc with mutiple properties – expense or capitalize?

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    In an LLC, Organizational Costs are expenses incurred to form the entity. These include items such as legal expenses to draft the formation documents, such as articles of incorporation, partnership agreements, and filing fees paid to the state organization.

    Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized. For information about amortizing start-up and organizational costs, see chapter 8.

    For reference, a good tax resource can be found here: https://www.irs.gov/publications/p535#en_US_2019_publink1000208939

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