Startups Anonymous Est. 2013 · Read-only archive
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Running expenses through your startup, how much can yout get away with?

I’d like to get some tax and investor insights on running expenses through a startup.

Things to note, I have a partner and I will seek out the advice of a CPA too.

My goal is to reduce my taxable income and I’d like to run a lot of my expenses through my startup because I found that they can be written off and deductible to a greater degree than if they were a personal expense. I’ve been very conservative with the expenses I’ve been running through the business to date and I’d like to push it to a higher degree. Because of this what issues could I run into when seeking funding in the future?

All thoughts and insights welcome.

11 answers from the community

AAnonymous· Jun 2, 2014

I have no idea but I would like to know about this too, so I eagerly await responses. I want to know how much I can legally get away with.

AAnonymous· Jun 2, 2014

Put direct expenses that you incur from doing activities related to your startup from your personal expenses.

If you mix the two, you loose your liability protection that you would have if you were setup as an LLC of corp. If you are running as a sole proprietorship, you have no such liability protection, so do what you want.

AAnonymous· Jun 2, 2014

You still can't do what you want as you might get audited. Personally I write off my cell phone bills, a lot of my social dinners, laptop and a portion of my rent (as workspace) on to my business.

I've heard the IRS frowns on writing the full amount of your cell phone to the business but cest la vie.

AAnonymous· Jun 2, 2014

This is advice specific to US based startups right?

AAnonymous· Jun 2, 2014

I hope so.

-op

AAnonymous· Jun 2, 2014

Among expenses I pay from my personal bank account, I write off about 10% of my rent (based on space fully allocated to a home office), 25% of cell phone bill (my daughter and I are on the plan), 50% of internet, and pre-formation direct expenses (attorney's fees, filing fees, etc). Where possible, I try to set up a bank account ASAP after formation and pay other business-related expenses from that account.

AAnonymous· Jun 2, 2014

I have a bank account that I set up for the business but got nailed on personal taxes this year due to some unexpected tax liabilities. Knowing the advantages of having your own business I'm trying to use this to my advantage. I do want to push whatever I can get away with but don't want to be an idiot about it.

-OP

AAnonymous· Jun 2, 2014

If you are an LLC, you can add language to the LLC agreement that says something like, "Members may incur their won expenses". Ask your CPA, but this then gives you ability to write it off in your personal tax returns, but keep it off the books of the business.

AAnonymous· Jun 3, 2014

Excellent, I have a call with my attorney tomorrow I'll ask them about this.

-OP

AAnonymous· Jun 6, 2014

OP, what did your attorney say about the suggestion to add "“Members may incur their won expenses” to the LLC agreement?

Is it true that this then gives you ability to write it off in your personal tax returns, but keep it off the books of the business?

AAnonymous· Jun 6, 2014

So you're putting your future at risk to save a couple of bucks? Let me know how that works out if things take off and the IRS comes knocking with fines.