La Quinta, CA
(760) 895-3516

Thursday, April 30, 2015

Deducting Organizational Expenses for California Corporations

A corporation in California can choose to deduct up to $5,000 of the corporation's organizational costs as if they were a current expense to the business. Once your costs exceed $50,000 for organizational expenses in the startup of your business, your deduction limit decreases dollar for dollar (i.e. $55,000 organizational cost = $0 organizational expense deduction.)

Any costs not deducted are going to be amortized over the next 15 years (180 months) beginning in the month the corporation starts doing business.

What do "organizational expenses" include from the perspective of the IRS? These are expenses from temporary directors and organizational meetings of the directors and shareholders as well as state incorporation fees plus any accounting/legal fees (drafting charter, bylaws/policies & procedures, meetings, terms of stock certificates setup) from the organization of the corporation's startup.

Don't bother trying to amortize or deduct expenses such as costs related to issuance or sale of corporate stocks (i.e. commissions for selling stocks), professional fees, printing costs, costs of transfering assets to the corporation at startup; it aint gonna fly with the big boys.