Business expenses- buy right now, deduct later?

February 6, 2015 4:37 PM

I would very much like to buy some things for my business which does yet technically exist. How does that work? Business owners of metafilter, pleas help me!

Later this year I will be starting a small business, will probably set it up as an LLC. I'm several months away from getting my state license in my field, and it's illegal for me to advertise or really get going with my business until I have that in hand.

What I would really like to do is decorate the small home office that I will be seeing clients in, and buy some of the equipment I'll need if I see something go on sale for a good price.

If I keep all of the receipts (money would be spent using personal checking account), will I be able to deduct these as business expenses? These things are definitely are 100% only for my business. Maybe its ok "sell" them to business for the price I bought them for and pay myself back. Or another way? Or will this be a world of hassle and headache? I'm definitely not trying to cheat the system or do anything shady so I'm not sure why this couldn't work somehow.

This is in Oregon. I will be hiring an attorney when I can start my business, but not yet.

posted by skjønn to Work & Money (2 answers total)

Erm, you can deduct business expenses against your personal tax returns, either as a sole proprietorship or as a function of your business activities for the LLC you're launching soon. The IRS doesn't particularly care that you started the business after you bought the goods, if they're in the same tax year. (By which I mean, short of an audit, they won't know, and even with an audit, you'd be able to claim business expenses against your personal accounts just fine.)

Business owners make business purchases using their own funds pretty frequently, and deduct them. If you keep receipts, you'll be fine.
posted by disillusioned at 4:56 PM on February 6, 2015 [5 favorites]

Technically, I believe the test is whether the business has commenced. If not, it's a start up cost that is capitalized and amortized. There's a, IIRC, 10k amount you can expense right away though.
posted by jpe at 6:28 PM on February 6, 2015 [1 favorite]