Businesses and individual taxpayers incur costs before beginning to operate the business. To qualify as startup

or organization costs and, thus, be subject to specific IRS rules, the costs must qualify as one of the following.

  • A business startup cost;
  • An organizational cost for a corporation;
  • An organizational cost for a partnership;

Startup costs are amounts the business paid or incurred for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Organizational costs directly relate to the formation of the business entity, i.e., a corporation or a partnership.

We describe each type of cost and related tax treatment separately in the publication below.