Business Expenses Prior To Incorporation

If i paid for my virtual car show company s startup expenses with my personal account before incorporation can i reimburse myself with funds from the corporate account and then deduct them in the first year.

Business expenses prior to incorporation. The credit entry sets up a liability representing the amount due by the business to the owner. Expenses incurred prior to a business being open for business are not expenses. These are termed as preliminary expenses or startup expenses.

They were under 5000usd. You can write off certain expenses as long as the business opens. Preliminary expenses could also be charged against capital reserve out of profit prior to incorporation.

There is a separate category related to organizational costs fees associated with establishing the business like legal services. According to section 61 of the corporation tax act 2009 cta 2009 assuming any pre trading expenses are legitimate the expenses are treated as if they were incurred on the start date and therefore a deduction is allowed for them expenses can be claimed for up to 7 years before a company starts up in business. D expenses that are solely incurred for the company on and after its incorporation for example preliminary expenses or interest on debentures or directors fees should be charged wholly to the post incorporation period.

Credit the incorporation expenses have been paid by the owner from personal funds the business therefore owes this amount back to the owner. If your start up expenses exceed 5 000 you must depreciate any amounts above 5 000 over 15 years. Allowable expenses include those related to investigation such as travelling to potential business locations and preparation for example employee training.

This is from september to december. You would multiply the amortization period by 4 months. In the example 83 34 times 4 equals an amortization expense of 333 36.

Currently the small scale businesses and startup companies are unaware of the benefits that can be claimed regarding these expenses. The debit entry records the incorporation expenses which are the costs of setting up the business. 1 00 000 on condition that all profits earned from 1 1 2009 shall belong to the company.