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Business Losses In Llc And Ordinary Income

Business Law discussions

Business Losses In Llc And Ordinary Income

Postby Ignado » Mon Sep 19, 2016 10:24 pm

s About Taxes)/Business losses in LLC and ordinary income Advertisement Expert: Randall Klein, MBA, EA - 10/20/2011 Hi

I have recently retired and i received a severance payment in 2011.  In addition, i receive approx $100,000 per year in ordinary income from my company..

I have an opportunity to invest approx $150,000 and I have formed and LLC to own my business.  Assume the $150,000 is capital to improve a space, and buy fixtures, etc..I also believe the business could lose money for a couple years before breakeven.. I will not pay myself as owner.

My question is am i generally able to write off my capital expenses and my losses against my personal ordinary income??

In the most simple case, if I make $100k personally, can I reduce my gross income for a tax year by my capital investment and business losses??
Ignado
 
Posts: 49
Joined: Tue Jan 21, 2014 1:13 am

Business Losses In Llc And Ordinary Income

Postby Berthold » Tue Sep 20, 2016 3:18 am

You cannot "write-off" your capital expenses in the year incurred. Capital expenses must be depreciated over the accounting life of the items. You may have some start-up and organizational costs, which, if they do not exceed $10K, each, can be deducted int he first year of business. If more than that, they will need to be written off(amortized) over a 15 year period. If you have operating losses, you may be able to deduct that against other ordinary income, subject to the hobby loss rules, below.

Also, be cuatious in that:

1. Your business has no expenses to write off until it STARTS the business, which the definition of "starts" can vary, but is usually related to the first day you make something available to be sold or services held for sale. The pre-opening costs are genearlly startup expenses.

2. If it will take several years to see aprofit, the IRS may consider your business to be a hobby if it doesn't show a profit in 3 of 5 years(longer for certain types of farming-related activities) and therefore subject you to hobby loss rules. Hobby rules basically state that you cannot take a loss against other non-business income.  
Berthold
 
Posts: 38
Joined: Wed Apr 09, 2014 12:14 am

Business Losses In Llc And Ordinary Income

Postby Deven » Thu Sep 22, 2016 1:54 am

s About Taxes)/Business losses in LLC and ordinary income Advertisement Expert: Randall Klein, MBA, EA - 10/20/2011 Hi

I have recently retired and i received a severance payment in 2011.  In addition, i receive approx $100,000 per year in ordinary income from my company..

I have an opportunity to invest approx $150,000 and I have formed and LLC to own my business.  Assume the $150,000 is capital to improve a space, and buy fixtures, etc..I also believe the business could lose money for a couple years before breakeven.. I will not pay myself as owner.

My question is am i generally able to write off my capital expenses and my losses against my personal ordinary income??

In the most simple case, if I make $100k personally, can I reduce my gross income for a tax year by my capital investment and business losses??
Deven
 
Posts: 38
Joined: Fri Jan 03, 2014 12:45 am


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