My husband and I are starting a business and obtained multi-member LLC in 2021. No gains or losses and leasing a stand-alone unit in a town center. Unit is still under construction but expenses are paid for leasing and construction in 2021, and business cards, etc. The business is not yet open.
You would prepare the return, to include rent and the costs such as the marketing (business cards). However, the leasehold improvements would not be deducted until the business began operating.
The down-payment to your contractor is part of the business asset you are creating. The total cost will be capitalized for depreciation once the unit is placed in service (ie: you are open for business).
You would prepare the return, to include rent and the costs such as the marketing (business cards). However, the leasehold improvements would not be deducted until the business began operating.
Thank you @ZoltanB45 for the help and reply! We paid only the down payment in 2021 so far to our contractor for the build-out. We should not claim this yet as an expense on the 2021 return?
The down-payment to your contractor is part of the business asset you are creating. The total cost will be capitalized for depreciation once the unit is placed in service (ie: you are open for business).
Thank you @PatriciaV for the reply! The build-out total cost itself will wait to be deducted until the business starts, and will be amortized? We need to complete a form to request amortization but not until business opens? Thank you for the help!
You won't need to elect to amortize - you'll simply add the total cost as an asset for amortization for your business. Until then, keep good accounting records so you have that information ready next year.