Corporations – Organizational Expenses

Just like start-up expenses new corporations have organizational expenses and these expenses can be deducted too. Up to $5,000 of organizational costs can be deducted as current expenses under the current tax code with the remaining costs amortized over a 180-month period. The catch is that these expenses must be incurred before the end of the first year the corporation is in business. The corporation can amortize organizational costs incurred in the first year even if the corporation does not pay them in that year if the business is being run on a cash or accrual basis.
Organizational expenses that may be deducted include accounting and legal fees incurred by the organization, incorporation fees and expenses related to temporary directors, organizational meetings of directors and/or shareholder meetings. Expenses related to the transfer of assets to the corporation, printing costs, professional fees and commissions cannot be deducted. Preparing all the necessary documentation for corporate organizational expenses can be tricky and is best left to the tax professionals.