Can I deduct startup costs on an LLC formed 2 years ago but just now being used?

I created an LLC back in 2023 as a disregarded entity, but honestly it just sat dormant for almost two years - no income, no expenses, nothing. Fast forward to now, and I've finally decided to actually use it for a real business. I've made some initial purchases (around $6,500 total) over the past couple months to get things off the ground. My question is whether I can still claim these as startup expenses on my 2024 taxes? The LLC technically existed since 2023, but the business itself is just now becoming active. The expenses definitely qualify as legitimate startup costs (equipment, initial inventory, some marketing materials), but I'm confused about the timing. Does the IRS care about when the LLC was formed or when the actual business activities began? Any guidance would be super appreciated!

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20 comments

Mia Green

•8M

You can absolutely claim those expenses as startup costs! What matters to the IRS isn't when the LLC was formed, but when you actually started engaging in business activities with the intent to make a profit. The IRS allows you to deduct up to $5,000 in startup costs in the year your business begins operations. Any amount over $5,000 would need to be amortized over 15 years. Since your total is around $6,500, you'd be able to deduct $5,000 immediately and then amortize the remaining $1,500 over time. Make sure you're keeping detailed records of all these expenses. You'll want documentation showing these costs were directly related to getting your business up and running. You'll report these on Schedule C if your LLC is a disregarded entity.

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Mia Green

•8M

The IRS generally recognizes a business as beginning when you start activities aimed at generating income. Your documentation is key here. Keep records of when you first purchased inventory, equipment, or started marketing efforts. It's also helpful to document your business plan, any client communications, website development, etc. If the IRS were to question this, they'd look for evidence of actual business activity, not just the legal formation date. Many people form LLCs but don't start operations right away, and the IRS understands this distinction.

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Lucas Kowalski

•8M

After dealing with a similar situation myself, I found this amazing tool called taxr.ai (https://taxr.ai) that helped me sort through all my LLC startup expense questions. I had formed an LLC two years before actually using it and wasn't sure how to handle my deductions either. What's cool about taxr.ai is it analyzed all my receipts and business formation documents, then gave me clear guidance on exactly which expenses qualified as startup costs vs. which needed to be capitalized. It even helped me understand how to document the "start of business operations" to justify the timing of my deductions. Definitely made my tax filing way less stressful!

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Lucas Kowalski

•8M

The accuracy has been really impressive - it uses the same tax rules and regulations accountants use, but it's available 24/7. I actually had my accountant verify some of the recommendations, and she was surprised by how thorough it was. It's especially good at identifying which expenses qualify for immediate deduction versus amortization. It absolutely works for partnerships and multi-member LLCs! The tool has specific sections for different business structures. For partnerships, it helps you understand how startup costs should be allocated among partners and guides you through the appropriate partnership return requirements. The dormant period doesn't matter - it focuses on when actual business activities began.

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Charlie Yang

•8M

I was really skeptical about using an AI tool for tax advice, but after checking out taxr.ai based on the recommendation here, I'm honestly impressed. My situation was almost identical - formed an LLC in 2021 but didn't do anything with it until this year. The tool analyzed my documents and confirmed I could claim startup expenses in the current year even though my LLC was older. It also pointed out some expenses I hadn't even considered deducting (like my domain registration from years ago that I'm finally using for the business). Saved me a ton of research time and probably a few thousand in deductions I would have missed!

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Grace Patel

•8M

If you're struggling to get a clear answer from the IRS about your LLC startup costs situation, I'd recommend trying Claimyr (https://claimyr.com). After spending HOURS on hold trying to get someone at the IRS to clarify this exact issue, I found this service that got me connected to an actual IRS agent in under 15 minutes. I was able to get official confirmation that I could claim startup expenses for my dormant LLC once it actually started operations. They have a quick demo video that shows how it works: https://youtu.be/_kiP6q8DX5c Honestly, getting that official answer directly from the IRS gave me so much more confidence in claiming those deductions on my Schedule C. Worth every penny to not have that uncertainty hanging over me!

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Grace Patel

•8M

It's not a priority line - they use technology that navigates the IRS phone system and waits on hold for you. When they reach a live agent, they call you and connect you directly. It basically automates the hold process so you don't have to sit there listening to the hold music for hours. I was super skeptical too! I had tried calling the IRS four separate times and waited over an hour each time before giving up. What convinced me was their guarantee - if they don't get you through to an agent, you don't pay. I figured I had nothing to lose and was genuinely shocked when my phone rang and there was an actual IRS representative on the line. The peace of mind from getting an official answer was totally worth it.

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Isabella Russo

•8M

Just wanted to follow up on my previous comment about Claimyr. I was completely wrong and owe you an apology. After being frustrated with another full day wasted trying to call the IRS myself, I tried the service and it actually worked exactly as described. Got connected to an IRS agent in about 20 minutes who confirmed that yes, startup costs are based on when business operations begin, not when the LLC was formed. She even gave me the specific publication number to reference if I needed to document this for my records. Definitely changed my view on dealing with the IRS - no more wasting entire days on hold!

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Rajiv Kumar

•8M

Just fyi - remember that startup costs over $5,000 have to be amortized over 15 years. So if your total startup costs are $6,500, you can deduct $5,000 this year but the remaining $1,500 has to be spread out at $100 per year for 15 years. Kinda annoying accounting-wise but that's the rule. Also keep in mind that not everything you buy when starting a business counts as a "startup cost." Some things might need to be depreciated separately (like equipment) or might qualify for immediate expensing under Section 179. Double check before filing!

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Rajiv Kumar

•8M

Equipment like laptops and printers would typically fall under Section 179 property rather than startup costs, which means you could potentially deduct their full cost in the year you place them in service (subject to Section 179 limits, which are quite generous). Marketing expenses like business cards and websites would generally count as startup costs if they were incurred before your business began actively operating. Once you're actually in business, those become regular business expenses deductible in the year you pay them. It's all about the timing - before active operations = startup costs, after active operations = regular business expenses.

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Emma Wilson

•5M

I went through almost the exact same situation last year! Formed my LLC in 2022 but didn't actually start using it until 2024. The key thing to understand is that the IRS looks at when you began "actively conducting business" rather than when you formed the entity. For your $6,500 in startup costs, you'll be able to deduct $5,000 immediately in 2024 and then amortize the remaining $1,500 over 15 years (so $100 per year). Make sure to keep detailed records of all these expenses and document when you first started engaging in business activities - things like your first customer contact, initial marketing efforts, or when you started actively trying to generate revenue. The dormant period doesn't hurt you at all. Many people form LLCs as a protective measure and then don't use them right away. What matters is demonstrating that 2024 is when you actually began operating with the intent to make a profit. Good luck with your new business venture!

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Zainab Abdulrahman

•2M

This is super helpful! I'm actually in a similar boat - formed my LLC in early 2023 but only started getting serious about the business this year. Quick question though: what kind of documentation did you use to prove when you "began actively conducting business"? I'm worried the IRS might challenge the timing since my LLC has been around for a while. Did you keep records of things like your first business bank account activity, initial website launch, or first marketing campaigns?

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