How do I enter incorporation expenses for our LLC? I heard that "Incorporation expenses can not be deducted as startup costs", but have to be included separately.

More broadly, this is a start-up owned by me and spouse. Should we enter this under both of us? Turbo recommended to put this under only one of us.

Answer

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Incorporation expenses are not considered a startup cost.  They are an "organizational expense."  Examples of organizational costs include:

  • cost of temporary directors
  • cost of organizational meetings
  • state incorporation fees
  • cost of legal services

Business start­up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start­up and $5,000 of organizational costs paid or incurred.  Any remaining costs must be amortized.


In TurboTax enter the incorporation fees and other organizational expenses (up to $5,000) as a business expense.  Any organizational expenses over $5,000 should be entered as an asset and amortized over 15 years. 
  1. Click on the Business tab > Continue > I'll choose what to work on
  2. On the Let’s gather your business info screen, in the Business Income and Expenses section, click the Start/Update button.  (See Screenshot #1, below.)
  3. If you have already started adding information about your business, you will see the Here's the business info we have so far screen.  Click on the Edit box next to the business.  (Screenshot #2.)
  4. If you haven't already started adding business information, continue through the screens to enter the needed information.
  5. You will now be on the Your [business description] Business screen.  In the Business Expenses section, click on the Start/Update box next to Other Common Business Expenses.  (Screenshot #3)
  6. On the Let's write off some business expenses screen click on the Start/Update box next to the appropriate category.  You could put some or all of the cost under Legal and Professional Fees or include some of the expense in Taxes and Licenses or Other Miscellaneous Expenses.  The category isn't crucial.  (Screenshot #4)

To enter startup costs, in Step #5 above:  In the Business Expenses section, click on the Start/Update box next to Startup Costs.




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