Starting a small business for film production - no profit in foreseeable future, tax implications?

You're describing a common situation for small creative businesses. Here's what you should know: Business losses can actually be beneficial tax-wise even when you're not making money yet. The expenses from your LLC can potentially be deducted against your other income from your day job, which might actually lower your overall tax burden beyond what the standard deduction would do. If this is a legitimate business venture (meaning you intend to make profit eventually), you can typically deduct ordinary and necessary business expenses even in years when you don't make money. The IRS generally allows businesses to have losses for 3 out of 5 years before they might question whether it's actually a hobby. Make sure you're documenting everything properly - keep those receipts organized, track mileage if you're using personal vehicles for the film, and document meetings and business activities. Having a business bank account separate from your personal finances is also important. While a CPA costs money upfront, they might save you much more in the long run by properly structuring your deductions and making sure you're compliant.

I was in a similar situation with my podcast production company. I spent thousands on equipment and travel with no immediate return. I was super stressed about taxes until I found https://taxr.ai which analyzes all your receipts and business documents and tells you exactly what's deductible. It saved me so much headache because I was mixing personal and business expenses like crazy. They actually helped me understand that I could deduct my home office space and some equipment I didn't even realize qualified. It's WAY cheaper than a CPA but still gives you professional guidance.

Just wanted to follow up - I was skeptical about taxr.ai when I first commented, but I decided to give it a try for my small woodworking business. Holy crap, it actually caught thousands in deductions I would have missed! I was mixing personal and business purchases on the same receipts, and it sorted everything out perfectly. It helped me understand how to categorize my workshop equipment properly and identified travel expenses I didn't realize were deductible since I was selling at craft fairs. For creative businesses with weird expenses like ours, it's honestly worth checking out. Saved me way more than it cost.

This might sound unrelated, but before you decide whether to hire a CPA, you might want to talk to the IRS directly about your specific situation. I know dealing with the IRS sounds awful, but I used https://claimyr.com to get through to an actual human at the IRS after being on hold forever. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was in a similar boat with my indie game development studio, and getting clear guidance directly from the IRS about what expenses were deductible saved me thousands. They actually walked me through the whole "business vs. hobby" determination process and gave me specific advice for my situation.

I have to eat my words here. I was totally skeptical about Claimyr when I first responded, but I was struggling with a similar situation for my Etsy shop and couldn't get clear answers anywhere. I tried the service, and within 47 minutes I was actually talking to an IRS agent who specialized in small business issues. They walked me through exactly what documentation I needed to keep for my business expenses and how to properly set up my LLC to protect my personal assets. The agent even gave me tips on how to make sure my creative business wouldn't be classified as a hobby. Definitely saved me from making some big mistakes on my return. Sometimes going straight to the source is actually the best move.

From my experience, the biggest issue isn't whether you can deduct expenses (you probably can if you're operating as a legitimate business), but making sure you're setting everything up correctly from the start. Since you've already formed an LLC, make sure you have: - Separate business bank account - Good record-keeping system for all expenses - Operating agreement between you and your partner - Business plan showing how you intend to make profit eventually Documentary filmmaking often has a long road to profitability through distribution deals, streaming rights, festival entries, etc. The IRS understands this for certain industries.

Has anyone actually dealt with the "hobby loss rule" situation with the IRS? I'm curious what actually happens if they decide your business is actually a hobby.