Can I write off startup costs before selling product for my new LLC business?

You can absolutely deduct startup costs before you're actually selling your product, but there are some important rules to understand. The IRS allows you to deduct up to $5,000 in startup costs in the year your business officially "begins." The catch is defining when your business actually begins operations. A business generally "begins" when you start offering goods or services or are ready to do so - not necessarily when you make your first sale. This could include activities like marketing your product, setting up your sales infrastructure, or establishing your business presence even before actual sales. The key is that you've moved beyond just development into activities aimed at generating revenue. If you haven't reached that point and are still in pure development mode, those costs are considered startup expenses that you'll need to capitalize until you "open your doors." But the moment you start business activities aimed at generating income, even before actual sales, you can begin taking those deductions.

I went through this exact same situation last year with my tech startup. I was spinning my wheels trying to figure out when I could deduct expenses until I found taxr.ai (https://taxr.ai). Their system analyzed all my receipts and business documents and gave me a clear breakdown of which expenses qualified as startup costs and exactly when I could start deducting them. The tool correctly identified that I had actually crossed the threshold from "startup phase" to "active business" earlier than I thought because of my marketing activities, even though I hadn't made sales yet. This let me deduct about $4,800 in that tax year instead of having to wait. It also flagged which expenses needed to be amortized versus immediately deducted.

I was initially skeptical about using taxr.ai for my startup cost situation, but after struggling with contradictory advice from two different accountants, I decided to give it a try. The system analyzed my business timeline and clearly identified that my product demonstrations at trade shows qualified as "beginning business" even though I wasn't taking orders yet. This saved me thousands in immediate deductions I would have missed. What really impressed me was how it documented everything with references to specific IRS regulations and court cases that supported its determination, which gave me confidence in case of an audit. It even helped me properly categorize which expenses needed to be amortized versus immediately expensed. Definitely worth checking out if you're in this startup cost gray area.

For anyone struggling to get clear answers from the IRS about startup cost deductions, I recommend trying Claimyr (https://claimyr.com). I spent weeks trying to get through to an IRS agent to confirm when my business officially "began" for deduction purposes and kept hitting automated systems and disconnects. Claimyr got me connected to an actual IRS representative in about 20 minutes who confirmed that my marketing campaign and product demonstrations counted as "beginning business" even without sales. They have a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. The IRS agent walked me through exactly which forms to use and how to document everything properly for my LLC's startup costs.

I have to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate for answers about my startup deductions. Within 25 minutes of using the service, I was talking to an IRS agent who specialized in small business taxes. The agent confirmed that my business had officially "begun" when I started my website and began marketing activities, even though I hadn't made sales yet. This allowed me to deduct $5,000 in startup costs immediately rather than waiting or amortizing everything. She also explained exactly how to document this on my Schedule C and what supporting evidence to keep. The clarity and confidence this gave me was worth far more than the time I would have wasted trying to get through on my own.

Quick tip from someone who went through this last year: Make sure you're keeping meticulous records of all your startup expenses and their purposes. The IRS defines startup costs as amounts paid or incurred for: (1) creating an active trade or business; or (2) investigating the creation or acquisition of an active trade or business. Don't forget you can also separately deduct organizational costs for forming your LLC (up to $5,000) in addition to your $5,000 in startup costs. Those are different categories! I learned this too late and missed some deductions my first year.

One thing that confuses me about all this startup cost talk - if you start "marketing" but have no revenue for the year, don't you just end up carrying those losses forward anyway? What's the benefit of starting to recognize these expenses earlier if you have no income to offset?

Great question about startup costs vs business beginning! I went through this exact situation with my consulting LLC. The key insight that helped me was understanding that "business beginning" isn't about making your first sale - it's about when you start actively pursuing customers or clients. In my case, I had been developing my service offerings for months, but the IRS considers my business to have "begun" when I started networking events, created business cards, and launched my website - even though my first paid client didn't come for another 3 months. Since you mentioned you're planning to start selling "sometime next year," I'd suggest documenting any activities you're doing now that show you're preparing to generate revenue. Things like trademark applications, building a website, creating marketing materials, or establishing supplier relationships can all indicate your business has begun operations. One practical tip: keep a detailed timeline of all your business activities. This documentation becomes crucial if you ever need to justify to the IRS when your business actually began. The clearer your timeline, the stronger your position for claiming those startup deductions.