Start-up costs are one-time expenses related to opening a new business, introducing a new product or service, expanding into a new territory or market, or starting a new operation. Examples include IT systems, equipment, advertising, legal services, permits, hiring, development, setup, deployment, and initial training costs. Accounting standards require start-up costs to be expensed as incurred. Tax laws allow deducting up to $5,000 of start-up costs, with amounts over $5,000 amortized over 180 months. Website planning costs are also expensed as incurred, while capitalization of website development costs is only permitted after the preliminary project stage is complete.

1. Start-up Costs
What defines a Start-up Cost?
o Openinganewfacility
o Introducinganewproduct or service
o Conductingbusinessinanew territory
o Conductingbusinesswithanentirelynew classof customersorbeneficiary
o Initiatinganewprocessinan existingfacility
o Commencingsome new operation
Examples of Start-up Costs:
o IT systemacquisition
o Laboratory equipmentacquisition
o Pre-programadvertising
o Buildingreconfiguration
o Legal services
o Acquisitionof permits/licenses Feasibilitystudies
o Recruitingandhiringproject/planstaff
o Developmentcosts
o Setup costs,integrationservices
o Deploymentcosts
o Initial trainingcost
Accounting for These Costs:
 AcSEC decidedthatitwasnot necessarytodevelopboundariesforwhenthe start-upperiod
beginsandends.The definitionof start-upactivitiesisbasedonthe nature of the activitiesand
not the time periodinwhichtheyoccur.
 The ED definesstart-upactivitiesbroadlyas “one-time activitiesrelatedtoopeninga new
facility,introducinga newproduct or service,conducting businesswitha new class of
customer or beneficiary,initiatinga new process in an existingfacility,or commencingsome
newoperation.”
 The ED requiresthat start-up costs be expensedasincurred.
Tax Laws
 The current tax laws provide differentrulesforstart-upcosts
 Everybusinessisallowedtodeduct$5,000 of start-upcosts;however,abusinessthatincursany
amountover$5,000 must amortize the amountfor180 months,whichbeginsthe monththat
active conductin the businessisinitiated.

2. o If a businessincursmore than$50,000 of start-upcosts, the original $5,000 deductionis
phased-out$for $.
o $55,000 of S/C = $0 deductionanda$55,000 amortization.Below isanexampleJEfor
the scenario:
Start-upCostsExpense 0
DeferredStart-upCosts 55,000
Cash 55,000
Website Development
 All costsincurredinthe planningstage – thisincludesall costsinthe developmentof anew
website.Regardlessof whetherthe website planningactivitiesspecificallyrelate tosoftware,all
costs incurredinthe planningstage shall be expensedasincurred.
 Generally,capitalizationof costsrelatedtowebsitedevelopmentisonlypermissible whenthe
preliminaryprojectstage hasbeencompleted.Thisstage isusuallyattainedwhenmanagement
authorizesandcommitstofundingthe projectandit isprobable thatthe projectwill be
completedandwill be usedtoperformthe functionintended.