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So I have an LLC for a construction company I started in 2015. During 2015, I started it late in the year. I'm the only one listed on the LLC. The main expenses in 2015 were the business license which cost roughly $500.00. I didn't claim any expenses that year. I also didn't have any customers that year, as I was just setting up the business while working a regular full time job.

In 2016, I still didn't have any customers and kept my full time job. I was trying to attract customers though, so I had a website made, and spent a good amount on advertising (approx $1500.00). Still no income though, which means no profit, and a loss of $2000.00 (the $1500 on advertising and the $500 renewal for my LLC registration).

The business was set up with a FID, bank account, and valid LLC registration for Massachusetts. My question is, can I deduct my business expenses on my Federal and/or State taxes? I currently file my taxes all together on my personal return, my company doesn't file a separate return. I would assume I can enter a loss of $2000 for the business, but is that legally allowed when there is no sales, income, or profits?

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The answer is "Yes", You can deduct them. As long as you showed that you put in effort to make a profit then you can deduct business expenses.

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    Though if you can't demonstrate a serious effort, this won't survive an audit. And I think the IRS starts telling you "no, that's a hobby" if you can't demonstrate significant income/investment after a few years.
    – keshlam
    Commented Jan 31, 2017 at 2:58
  • I don't know about the USA, in other countries the tax office will say "we think it's a hobby" and you can't deduct it, but once you make money you can deduct it. Like "remember that 'hobby' you wouldn't let me deduct? I made 20,000 so obviously it wasn't a hobby".
    – gnasher729
    Commented Apr 1, 2017 at 23:20

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