Business Deductions
- Amortization
- Business Losses and Net Operating Losses
- Car and Truck Expenses
- Day-Care Services
- Depreciating Business Property
- Depreciating Your Car
- Domestic Production Activities Deduction
- Health Insurance Deduction
- Home Office Deduction
- Meal and Entertainment Expenses
- Organizational Costs and Start-up Costs
- Qualified Plan Awards
- Schedule C Expenses
- Section 197 Intangibles
- Should You Sell or Trade in Your Car?
- Start-up Costs
- Travel Expenses
More Tax Topics
- Business Structures
- Hiring Workers
- Retirement
- Top Tax Myths
- Per Diem Rates - IRS Publication 1542 Oct 2011 for Travel Within the Continental U.S (for employers who pay a per diem allowance to employees)
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Need Some Deductions for 2012?
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Updated for 2012
What Are Organizational Costs?
Organizational costs are the direct costs of creating a corporation or partnership. They should not be confused with start-up costs which are costs incurred to investigate the acquisition or creation of an active business, and the costs of setting up an active business.
Qualifying Organizational Costs for a Corporation
Examples of qualifying organizational costs for setting up a corporation include:
- Accounting fees to set up the corporation's books
- Costs of organizational meetings
- Costs of temporary directors
- Legal fees to draft the corporate charter, bylaws, minutes of organizational meetings, terms of original stock certificates
- State incorporation fees
Qualifying Organizational Costs for a Partnership
Examples of qualifying organizational costs for setting up a partnership:
- Accounting fees to set up the partnership's books
- Filing fees
- Legal fees for negotiation and preparation of the partnership agreement
Nonqualifying Organizational Costs
Corporations:
The following costs do not qualify as organizational cost for corporations. Instead, they are classified as capital expenses and not amortizable.
These costs are part of the basis of your business and are recovered only when you dispose of your business.
- Commissions
- Professional fees and printing costs for issuing and selling stock.
- Costs incurred for transferring assets to the corporation.
Partnerships:
The following costs do not qualify as organizational cost for partnerships:
- Cost of transferring assets to the partnership
- Cost of making a contract regarding the operation of the partnership
- Costs of preparing a prospectus
- Syndication costs of marketing and issuing partnership interests
Next:
Startup and Organizational Costs: What Are Start-up Costs? Qualifying Start-up Costs; Two Categories of Startup Costs; Startup Costs versus Organizational Costs
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