Hello-
I started a small business in Dec 2022. No income in 2022. Am I required to amortize ALL expenses prior to the first day of business?
Key Milestones in order:
12/6 Paid for and received LLC - one time fee
12/16 Paid for and received City/State licenses - one time fee
12/21 Paid for Contractor Bond - Annual Premium - I will pro-rate for December 2022
12/22 Paid for Contractor Insurance - Annual Premium - I will pro-rate for December 2022
12/22 Paid for and received Contractor License - FIRST DAY OF BUSINESS
Main concern is the one-time license fees. For a small business, are these still required to be amortized, or may I take a deduction for the full amount in 2022?
Edit: I should add that I'm using the cash method of accounting.
Thank you!!
As you started business activity in December 2022, you can expense all the above items in 2022.
Among the items, only the LLC registration fee can be counted as start-up costs. All other items are current expense items. As you use the cash method, there is no need to prorate items paid for one full year.
Please read this IRS document for more information, under the heading Business Start-up and Organizational Cots.