limit on deducting start-up costs for two LLCs: $5,000 or $10,000?

[Anonymous]

In 2021, I created two different LLCs.  I am the sole member of each of them.  My understanding is that $5,000 of start-up expenses can be deducted in the year an LLC is created, but I can’t figure out if this is $5,000 per taxpayer or $5,000 per LLC.   I'm hoping it's the latter, since there were separate costs involved for each LLC, but I don't want to assume anything.   

[ColeenD3]

It is per business. However, your two separate Schedule Cs have to be for two completely different businesses. If you do essentially the same work for both, you would only have one Schedule C.

[Anonymous]

Thank you for your reply. 

As a follow-up, could you please clarify what you mean by "two completely different businesses"?  The two LLCs I created are both for real estate investment, but they are registered in two different states and contain different properties.  Does the fact that they are both real estate investment companies make them the same business?  Or does the fact that they are in different states and involve different properties make them different?  

[DianeW777 · Accepted solution]

Yes, they are the same real estate investment activities. Since you are the same or sole operator of both businesses and if your LLC is a single member LLC (SMLLC) then the location of the properties doesn't really matter. This would involve all of the same work and business activity.

As indicated this should all be reported on one Schedule C or Schedule E, as the LLC would be a disregarded entity for IRS (tax) purposes.

[AmeliesUncle]

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@Anonymous wrote:

for real estate investment 

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It depends on exactly what you mean, but often "real estate investment" does not rise to the level of a business.  IF that were to be the case, Start Up costs are not allowed, and would be added to the Basis of the property.