Yes, even if you are operating your business without a license , you would be able to deduct the expenses incurred to try to make your business better. This is as long as the expenditure itself is not illegal. So, if you are a drug dealer, you would not be able to deduct the drugs you bought to sell, but you would be able to deduct your mileage because that is a typical allowable expense and driving is not violating any specific federal, state or local laws.
If you would be fined for operating a business without a license, that fine would not be deductible.
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