Start-up Business Filing Tax Return

[dickens]

My partners and I started a business midyear '06. The business is not
operational and still in the planning stage. We have incurred minimal
expenses thus far:

5/26/2006 11.18 Godaddy (Annual Domain Name Fee + 2 months of server
space/DB access)
7/14/2006 48.51 NOLO LLC Book
7/27/2006 188.99 Turnkey Web Tools
7/26/2007 3.99 Godaddy (Server Space charge)
8/5/2006 47.72 Best Software Accounting
8/9/2006 44.98 1 & 1 Internet (3 Mo.)
8/23/2006 203.86 Windows XP Pro (2 Copies)
8/30/2006 5 Google Book
9/21/2006 45 Registered Agent Fee
10/30/2006 120 Certificate Of Formation Fee
11/8/2006 44.98 1 & 1 Internet (3 Mo.)

764.21 Total

Us three partners have each incurred 1/3 of the cost equally.

Questions:

1.) How would I classify/post these expenses for internal accounting
purposes?

2.) Does the business have to file a tax return even though we are not
operational? The business is registered in Deleware as LLC.

3.) Do these expenses incurred trickle down to our personal tax returns
and reduce our taxable income?


Thanks,

Joe

 

[Jim Kingdon]

1.) How would I classify/post these expenses for internal accounting

purposes?

That's largely up to you. If you don't have any particular needs
other than taxes, use the categories from Schedule C of form 1040
(or the equivalent for partnerships or corporations).

2.) Does the business have to file a tax return even though we are not
operational? The business is registered in Deleware as LLC.

See Publication 541 - "An LLC may be classified for federal income tax
purposes as either a partnership, a corporation, or an entity
disregarded as an entity separate from its owner"
http://www.irs.gov/publications/p541/ar02.html
(there are some references there to follow - I didn't go through the
whole thing).

3.) Do these expenses incurred trickle down to our personal tax
returns and reduce our taxable income?

See the section on hobby vs business at
http://www.irs.gov/faqs/faq-kw128.html

There are also the at-risk rules at
http://www.irs.gov/publications/p925/ar02.html

The short answer is that I don't know the answer. It's a lot simpler
if you have a gain instead of a loss, but losses can work as you
suggest.