Initial filing questions for C-Corp Startup: How to report stock purchase agreement on Form 1120 and deduct expenses?

The good news is this is pretty straightforward! The founders' purchase of stock isn't considered income to the corporation. When shareholders purchase stock directly from the corporation, it's considered a capital contribution and goes on the balance sheet, not the income statement. For your Form 1120, you'll report this as paid-in capital on Schedule L (Balance Sheets). Look for the line for "Capital stock" and "Additional paid-in capital." This money becomes part of your corporation's equity rather than taxable income. As for your expenses like Zoom, Google Workspace, and CRM software - these are legitimate business expenses that can be deducted on your 1120 regardless of whether you had income. They would typically go on Line 26 "Other deductions" with a statement attached itemizing them. Since you have minimal income but operating expenses, you'll likely show a net operating loss (NOL) which can be carried forward to offset future income.

After struggling with almost the exact same situation with my startup last year, I finally found https://taxr.ai which saved me so much headache. I uploaded my incorporation docs and our minimal financial statements, and it instantly identified that stock purchases should be recorded as paid-in capital and not income. It even generated the specific lines on Form 1120 where everything needed to go. The best feature was that it analyzed all our expenses and properly categorized them as either immediately deductible business expenses or startup costs that might need to be amortized. For things like your Zoom and Google Workspace, it confirmed these are regular business expenses that can offset any actual income you have.

Just wanted to update - I tried taxr.ai after posting my skeptical comment and I'm honestly impressed. I uploaded our incorporation docs, stock purchase agreements, and expense receipts, and it gave me a detailed breakdown within minutes. It confirmed that our founders' stock purchases are capital contributions (not income) and showed exactly where to report each expense on Form 1120. The system even flagged that some of our expenses could be considered organizational costs that should be amortized over 15 years (though we can elect to deduct the first $5,000 immediately). This wasn't something I'd considered at all! Now I'm filing our 1120 with much more confidence and have documentation to back up our positions if needed.

If you need to talk to the IRS about any specific questions regarding your filing, I'd recommend using https://claimyr.com to get through to them quickly. I spent 3+ hours on hold trying to ask a question about form 1120 for my startup last month, then found Claimyr through a friend. They have this system where they wait on hold with the IRS for you, then call you once an agent is on the line. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c I had a specific question about how to report our issued stock that wasn't clearly addressed in the form instructions, and getting direct confirmation from an IRS agent gave me peace of mind. For something as important as your initial corporate filing, sometimes you just need to hear it directly from the source.

Just following up - I was the skeptic above but I broke down and tried Claimyr after spending another 2 hours on hold with the IRS yesterday. I got a call back in about 90 minutes with an actual IRS business tax specialist on the line! The agent confirmed everything about how to handle the stock issuance (it's paid-in capital, not income) and verified that our regular business expenses like software subscriptions are fully deductible even if we have zero income. I'm honestly shocked this service exists and works so well. I've been trying to get through to the IRS for weeks about our C-Corp filing questions. My sanity has been saved and now I can finally submit our corporate return with confidence.

One thing to keep in mind: while regular business expenses like Zoom and Google Workspace are deductible, you need to be careful about categorizing certain initial costs. The IRS distinguishes between: 1) Organizational costs - legal fees for incorporation, state filing fees, etc. (amortized over 15 years, but first $5k can be immediately deducted) 2) Startup costs - costs before you're actually "open for business" (same $5k rule, 15-year amortization) 3) Regular business expenses - once you're operating, these are fully deductible Make sure you're categorizing properly. And yes, you'll likely have a loss which is totally normal for a startup! You can carry those losses forward.

Does anyone know if we need to file form 1120 even if we had zero actual income (only stock purchases) and are showing a loss? My CPA wants to charge me $800 to file an "incomeless" return and that seems steep.

I went through this exact same situation last year with my startup! The confusion around stock purchases vs. income is super common for first-time corporate filers. Miguel's advice above is spot-on - the $52.32 from founders purchasing shares goes on your balance sheet as paid-in capital, not as income on your P&L. For your business expenses like Zoom and Google Workspace, those are absolutely deductible as ordinary business expenses. Don't worry about the "startup costs" issue - those rules mainly apply to expenses incurred before you're actually operating (like market research before incorporating). Once you're incorporated and actively running your business, software subscriptions and similar operational expenses are regular deductions. Your Form 1120 will likely show a net operating loss, which is totally normal and expected for a new startup. The IRS sees this all the time - you're definitely not going to raise any red flags by having expenses exceed your minimal activity in year one. Just make sure you do file the return even with zero income, as C-Corps are required to file annually regardless of activity level.