Can you reimburse business startup expenses from before the LLC was formed? (2024)

‎May 22, 20244:25 PM

Yes, a business can reimburse a business owner for start-up expenses if the owner has an accountable plan in place and the expenses are deductible.

Start-Up Costs are expenses that would be deductible by an existing trade or business and are incurred before the active trade or business begins.

Organizational Costs are expenses incident to the creation/formation of a business entity.

Up to $5,000 of Start-Up and Organizational Costs may be deducted as a current business expense. The amount in excess of $5,000 is amortized over 180 months.

The IRS refers to these as 'business start-up costs ', which are the expenses you incur before your business begins, and 'organizational costs ', which are the expenses you incur during the process of setting up your business.

https://www.irs.gov/newsroom/heres-how-businesses-can-deduct-startup-costs-from-their-federal-taxes

Your LLC canelect todeduct up to $5,000 of businessstartupcosts andup to $5,000 of organizational costs paid or incurredin the first year of filing a return. The remaining costs mustbe amortized(spredout) any remaining costs overa 180­month period.Assumingyour expenses are not over $50,000.

The LLC filing costs are examples of organizationalcosts.