Accounting & Bookkeeping & Small Business Forum

[Guest]

When starting a business, in this case a restaurant. All the cost incurred to get the local ready to open, kitchen equipment, carpet, all the purchases at the hardware store. Should I count that as start-up cost and get it amortized over 5 years or should I expense everything under $500?

Thanks

[Guest]

Startup costs are amounts paid in connection with creating an active trade of business or for investigating the creation or acquisition of an active trade of business. Start-up expenses must be of a type that could be deducted in the current tax year by an existing trade of business for expansion purposes. So, any equipment, carpet, or fixed asset purchases are considered as fixed assets and will be depreciated the normal way, as they could not be expensed in the current year under normal operaations. Other "expense" type items should be set up as start-up costs.

[Guest]

Bryan,
Regarding depreciation "in the normal way" of the fixed assets -- it will not commence until the start-up period of the business is completed and the business has become operational. Until that time the assets have not been "placed in service" in a trade or business or for the production of income.