Avery Has Always Wanted To Own Their Own Business Last Year

Question

Avery Has Always Wanted To Own Their Own Business Last Year They Too Avery has always wanted to own their own business. Last year, they took the leap and opened a pet store in a nearby city. They leased the store, incurred start-up costs, and invested in large inventory, purchasing pet food in bulk. Additionally, Avery bought three large tables and a machine that moves food to higher shelves for storage. They hired five employees: a groomer, two clerks, a stock person, and a bookkeeper with accounting experience but limited tax knowledge. Now, Avery is seeking guidance on how to handle the start-up costs, what types of assets they can depreciate, and what records they should maintain for tax purposes.

Dr. Jack HW Helper · Accepted Answer

Starting a new business involves numerous financial considerations, especially concerning start-up costs, asset depreciation, and record-keeping. For new entrepreneurs like Avery, understanding these aspects is essential to ensure compliance with tax regulations and to optimize financial management. This paper explores how Avery can handle start-up costs, identify depreciable assets, and establish effective record-keeping practices. Handling Start-Up Costs Start-up costs refer to expenses incurred before the business begins operations. These include costs related to market research, legal fees, licensing, and initial inventory purchases. IRS guidelines classify start-up costs as capital expenses, which can be deducted over time or, in some cases, immediately expensed. Specifically, under U.S. tax law, businesses can elect to deduct up to $5,000 of start-up costs in the first year of operation, with the remaining amortized over 15 years (IRS, 2022). For Avery, this means they can deduct portions of their initial expenses, such as legal fees for setting up the business or initial marketing, while the costs of inventory and equipment may need to be capitalized. Assets That Can Be Depreciated Assets that have a useful life beyond one year are generally subject to depreciation. For Avery, eligible assets include the equipment, furniture, and possibly the machine used to move food to higher shelves. The IRS categorizes such items under specific asset classes, each with designated recovery periods; for example, furniture and fixtures typically depreciate over seven years, while certain equipment might depreciate over five or three years (IRS, 2021). The large tables and the shelving machine are tangible assets that can be depreciated over their useful life, reducing taxable income gradually over time. Record-Keeping Practices Effective record-keeping is vital for financial management and tax compliance. Avery should maintain detailed records of all expenses, including rece

Avery Has Always Wanted To Own Their Own Business Last Year ✓ Solved

Avery Has Always Wanted To Own Their Own Business Last Year They Too

Sample Paper For Above instruction

Handling Start-Up Costs

Assets That Can Be Depreciated

Record-Keeping Practices

Conclusion

References