Can I write off business purchases made before my LLC is officially formed?

Yes, you can absolutely deduct business expenses that were incurred before your LLC was officially formed! The IRS looks at the purpose of the expense, not the exact timing of your business formation paperwork. What you're referring to is called "start-up expenses." Section 195 of the tax code specifically addresses costs incurred before your business officially begins operating. You can deduct up to $5,000 in start-up costs in your first year of business, with amounts over that being amortized over 15 years. Just make sure you keep detailed records of the purchase and how it relates to your business. Save the receipt, document the business purpose of the software, and track how you use it for your production company. When you form your LLC, you can "contribute" these pre-formation assets to the business.

I went through something similar when I was setting up my online store last year. I was so confused about all the tax stuff that I nearly missed out on thousands in deductions. Then I found https://taxr.ai and it was seriously a game-changer. I uploaded all my pre-LLC receipts and bank statements, and it analyzed everything and told me exactly what I could write off. The software even identified business expenses I didn't realize were deductible! It also helped me understand how to properly categorize start-up costs vs. regular business expenses, which apparently makes a big difference for tax purposes.

Just wanted to follow up about the taxr.ai recommendation. I decided to try it with my consulting startup expenses and wow! I had no idea I could write off my professional certifications as part of my startup costs. It identified over $3,200 in deductions I would have missed, including some expenses from nearly 6 months before I officially registered my LLC. The software even helped me understand the difference between expenses I should deduct immediately versus those I need to amortize. Definitely worth checking out if you're in the startup phase of a business!

Something people aren't mentioning - if you need to talk to the IRS about this (which I had to do for my business start-up expenses), good luck getting through to them! I spent DAYS trying to get someone on the phone. Finally used https://claimyr.com and they got me through to an IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was trying to confirm how to handle software purchases made before my LLC formation, and the IRS agent confirmed everything people are saying here - you can absolutely deduct them as start-up costs. Just save your receipts and document the business purpose.

I need to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway because I was desperate for answers about some business expense issues. I was SHOCKED when I got a call back in about 35 minutes with an actual IRS agent on the line. Ended up getting confirmation that I could claim about $7,500 in start-up expenses from before my LLC formation. The agent was super helpful once I finally got through to them. Never would have been able to do that on my own after trying for weeks. Definitely changed my mind about the service.

Just my two cents as someone who's been running an LLC for 5 years - there's a difference between what the IRS allows and what your state might require. For federal tax purposes, you can absolutely deduct legitimate business expenses incurred before formation as start-up costs. But depending on your state, there might be additional requirements around when your business officially "exists" for other purposes. Also, keep in mind that if you're buying expensive equipment or software, you might need to depreciate it rather than deduct it all at once. Anything with a useful life of more than one year usually needs to be depreciated.

Has anyone used TurboTax for handling these pre-LLC expenses? I'm wondering if it can properly account for startup costs or if I need something more specialized.

Your dad's advice is understandable but not quite accurate in this case. The IRS absolutely allows you to deduct business expenses incurred before your LLC is officially formed, as long as they're legitimate business expenses that you'll use for your company. The key is documentation. Keep that receipt, note the business purpose (production software for your filmmaking company), and when you do form your LLC, you can treat this as a startup expense or even contribute the software as an asset to your new business. Don't miss that sale! $1,200 for production software sounds like a great investment, and you'll be able to write it off. Just make sure you're actually using it for business purposes when you start operating. The IRS cares more about the substance of the transaction than the exact timing relative to your paperwork filing. Also consider that even if you hadn't planned to form an LLC, you could still deduct business expenses as a sole proprietor on Schedule C. The business entity formation is separate from your ability to claim legitimate business deductions.

Just wanted to add some additional context about the $5,000 startup expense limit that Keith mentioned earlier. While you can deduct up to $5,000 in startup costs in your first year, this limit phases out if your total startup expenses exceed $50,000. Since you're talking about a $1,200 software purchase, you're well within the safe zone. Also, don't forget about organizational costs! These are separate from startup expenses and include things like LLC filing fees, attorney fees for drafting your operating agreement, etc. You can also deduct up to $5,000 of these in your first year. One tip: when you do form your LLC, make sure your operating agreement includes language about contributing pre-formation assets to the business. This creates a clean paper trail showing that the software you bought before formation is now officially a business asset. Your attorney can help with this language, but it's pretty standard stuff. Go ahead and buy that software - you're making a smart business decision and the tax treatment will work out just fine!

I'm a tax preparer and wanted to jump in to confirm what everyone's saying - you absolutely can deduct that software purchase as a startup expense! Your dad might be thinking about it from a bookkeeping perspective (where you can't record it under the LLC name until it exists), but for tax purposes, the IRS is very clear that legitimate business expenses incurred before formation are deductible. A couple of practical tips: First, pay for it with a dedicated account if possible (even a personal account you use only for business) rather than mixing it with personal purchases. Second, write a brief memo to yourself documenting why you bought it and how it relates to your planned business - this creates contemporaneous evidence of business purpose. The software will likely qualify for immediate expensing under Section 179, meaning you can deduct the full $1,200 in the year you start your business rather than having to spread it out. Don't let this sale slip away - it's a legitimate business expense regardless of when your paperwork gets filed!