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Start-up Cost over $55k and business not yet operating

bellerod
Level 2

Hello, 

How do I report start-up and(or) organizational cost for a company that was set up but not yet operating? They didn't have any income/revenue and no customers yet. The Company is a franchisor and wants to file as an S-corp. The start-up cost amount to over $55k but less than $140k. I keep readying online that start-up cost if capitalized, the amortization would begin when the business begins operations. If that is the case, what do I have to report in the initial year when they are incurring the start-up cost but not yet operating? I am confused, can someone please help me?

Thank you in advance!

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3 Comments 3
PhoebeRoberts
Level 10
Level 10

Assuming the 1120S has a filing requirement, you just capitalize all the startup expenditures onto the balance sheet. I personally attach a schedule of the startup expenditures incurred, but I'm not sure that's technically required for pre-startup years.

bellerod
Level 2

@PhoebeRoberts Thank you very much for your response. By filing requirement, do you mean they might not even have to file a return? They want to elect S-corp status for 2021. I realize that they are late and was going to file 2553 with the rev proc 2013-30. What was holding me up is that I didn't know how to account for the start-up cost. 

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PhoebeRoberts
Level 10
Level 10

In that scenario, I would file the return whether or not it was technically required. (My memory said that there was an exception for entities with no activity, but the current forms instructions say that if you're a corporation or anything taxed as a corporation, regardless of flavor, you have a filing requirement.)