Prior to initiating operations, every business spends money to develop the idea and create the legal entity. These types of costs are referred to as ‘Organizational Expenses’. There are several different types of organizational expenditures. These include research and development, legal and start-up costs.
Section 195 of the Internal Revenue Code addresses start-up expenditures for most business. These expenses include research costs, training, travel and lodging associated with the research. The code allows a one-time $5,000 special deduction and any balance is amortized over 15 years.