Candlewood llc started business on september 1, and it adopted a calendar tax year. during the year, candlewood incurred $6,500 in legal fees for drafting the llc’s operating agreement and $3,000 in accounting fees for tax advice of an organizational nature, for a total of $9,500 of organizational costs. candlewood also incurred $30,000 of preopening advertising expenses and $24,500 of salaries and training costs for new employees before opening for business, for a total of $54,500 of startup costs. the llc wants to take the largest deduction available for these costs. how much can candlewood deduct as organizational expenses? as startup expenses?

Organization expenses    $5,100

Startup expenses     $1,700

Explanation:

Calculation of organisation expenses and startup expenses

Particulars    Calculations    Amount

Actual expense                      $54,500

Reduced for startup upto         $50,000    $5,000

1. LLC may deduct    ($9,500 - $5,000)*4/180  $100

Organization expenses  ($5000 + $100)  $5,100

2. Deduction for startup  ($5,000 - $4,500)  $500

Write off during the year  $54,000*4/180  $1,200

Startup expenses          $1,700

NB: Startup expenses are all expenses incurred for the start-up of the business are known as the startup expense which is related to the existing expense of business and will be approved after the firm.

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