Can one pay for expenses that a start up requires before forming your LLC or Corp?
Can one pay for expenses that a start up requires before forming your LLC or Corp? Is it then possible to count them as expenses when you start one?
Getting Started Incorporation Payments Expenses
3 Answers
In Short, Yes.
However you should consult an accountant (which I am not), to tell you the specifics of how to do this in a legal manner. Some variables to consider are the country in which you operate and are taxed, and what method of accounting you use.
One possibility is repaying yourself for prior expenses once the company has formed, has a bank account, and has money in said account.
The best advice I can give you is keep your receipts so you can determine what is a proper business expense and what is not.
Hope this helps,
-Nick
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so that does mean that i could spend money now or have another founder spend money now, save these receipts and once the LLC is formed, use these receipts as proofs for expenses on the company? I guess the only concern really is if when it comes to taxes then I could declare those expenses and be taxed accordingly? – Vnchopra 14 years ago
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Yes. You will be able to use those receipts as proof of expenses, and be able to claim tax relief according to the law in your country of operations! – Nbeecroft 14 years ago
Yes. This is a common thing to do when starting a company. The way this is handled is that you fill out an expense report and submit it to the company. As with any expense report, you need to have the receipts to back it up (just like waxingibbous said).
Yes. Business expenses or activity in advance of becoming an LLC/Corporation are really just sole proprietor expenses. With this viewpoint you're asking about expenses incurred as a sole proprietorship prior to organizing as an LLC.
I'd recommend LLC or Corporation? by Attorney Anthony Mancuso (I just noticed it is 40% off until April 15th). While the book is about setting up an LLC vs. a corporation, there's some good background information about sole proprietorships (pre incorporation if you will) and sections about converting a sole proprietorship to either entity.
