Dallas, TX asked in Tax Law and Business Formation for Texas

Q: Can I register an LLC and deduct expenses if no revenue comes from it?

There is a potential part-time consulting job that would require software for the next round of the pitch. Also, I am spending thousands in due diligence on a potential private investment. I look to do more of these kinds of deals even if these don't work. If I register an LLC, can I deduct those expenses even if no revenue comes from it?

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1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: Yes, you can generally register an LLC and deduct business expenses, even if no revenue is generated immediately. The IRS allows deductions for ordinary and necessary expenses incurred while actively pursuing a business, which includes startup and operational costs. However, it's crucial to maintain proper records and demonstrate a genuine intention to operate a business in order to claim these deductions legally. Consulting with a tax professional or accountant is advisable to ensure compliance with tax regulations.

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