Paid 50k franchise fees in 2016. Still looking for a location for the business. Do I claim the 50k in 2016 or have to wait until the business is operational?

[newfranchiseowner]

Bought a franchise and signed an agreement in 2016. Paid the fees of 50k to the franchisor.

Also spent ~5k in travel / training at the franchisors head quarters.

We are still finalizing the location for the franchise though and we expect to open sometime in 2018 - so no income until then.

Can I claim any of the 55k spent (I understand the 50k franchise fees would be amortized over 15 years) in 2016? When does the clock for 15 years start?

What about the 5k of business expense?

[Carl]

Presently, you don't have one single penny of business expense. What you have is classified as a start-up expense. Start up expenses are claimed/reported in the first year you are "open for business". It doesn't matter in what year those startup expenses were incurred either. It's not at all uncommon for a franchise to take 3 years or so, before it's "Open for business". So you have nothing to report on any tax return until you are "in fact" open for business.

Now, if this business is registered as a C-Corp or S-Corp, none of the above applies to you and is not true. I would STRONGLY urge you to seek the services of a CPA in *your* local jurisdiction for this. A C-Corp or S-Corp is *required* to file from the date such a business was "declared active" in the state where the corporation is registered. It's active, on the date of registration. You need a tax attorney to CPA to help you with this for at least the first year. Doing things wrong can *and will* come back to bite you later. Then all the fines, penalties and late fees can easily bankrupt your business before it even gets off the ground. So if your business is a registered corporation *SEEK PROFESSIONAL HELP*. The cost of a CPA will be a pittance, compared to the potential cost of not having one and doing things wrong.

[newfranchiseowner]

I don't have a C-Corp or S-Corp just yet. Plan to form a LLC when we get further along in the process and are ready to sign a lease. Currently, the Franchise is just in our personal name.

[Carl]

"our" personal name? Or just yours? It matters.

[newfranchiseowner]

Ours as in me and my wife. We file married filling jointly.

Not a partnership with other folks.

[Carl]

If the business is owned by more than one person, then as far as the IRS is concerned, it's a partnership. Doesn't matter that the two partners are married. But still, since that's what it is, you have nothing to report until the tax year you are actually "open for business".
You two "NEED" to get with a tax attorney NOW. Laws differ state to state, and the laws of a specific state DO impact how you report things on the federal side. I'm begging you, for your own piece of mind and to keep you from ending up filing bankruptcy and on skid row before the business even gets off the ground, SEEK PROFESSIONAL ASSISTANCE! At least in the beginning.
Generally for folks doing as you two are, you start out with a CPA or Tax Attorney for "at least" the first year. Then after that, and if you're comfortable with it, you can discontinue the CPA and do things on your own. But if you get even one tiny mistake in that first year, that mistake tends to grow exponentially year to year. Then when you do catch it down the road, correcting it is not just time consuming, it's costly to the point that it can easily bankrupt you, and make the cost of professional help seem like a pittance in hindsight.
If have personally seen this happen on more than one occasion in my town. Basically, one can heed the advice of someone trying to help, now. Or they can risk a contempt charge if they don't follow the orders of a bankruptcy judge later.
Right now, since you've not set up even an LLC, every single thing you two own is at risk. You've already got over $50K into this. Do you "really" want to risk losing even more, to include anything and everything you own? I would certainly hope not.