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I bought a domain ($3,000) right before I started a business SMLLC (single-member LLC). At the time, I thought that the domain can be treated as "start-up" cost so I do not need to capitalize the asset. However, after some research, it seem like I do have to capitalize it.

But the question is how? I bought the domain using my personal credit card, but it will be transferred to my business (SMLLC) for business use. So how can I capitalize something that the business did not pay for? (It is not paid via business card or bank account since they didn't even exist at the time of domain purchase).

Or can I treat it as a "start-up cost"? If so, is there any reasoning/reference as to why I can do this?

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  • Tip: Tax questions ought to have a country tag. Mar 13 at 3:25
  • Just added. Thanks for the reminder! Mar 13 at 7:53
  • Just have the business buy the domain from you. (Reimburse yourself for the $3K.) That gets it on the books. Whether you capitalize or fully deduct in year 1 is another matter.
    – TTT
    Mar 13 at 19:07
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IRS doesn't care. Most likely, neither will someone suing you.

I'm sure you are running your SMLLC with the default "pass-through" tax treatment (not "corporate" tax treatment where it files its own Form 1120). So the IRS considers it a "disregarded entity" and couldn't care less whether the domain is yours personally or in the LLC.

The main feature of an SMLLC is a liability shield. Now, to maintain that liability shield, you do need to conduct the business's affairs as a separate corporate "person", and have "business money and assets" strictly separated from "personal money and assets". Obviously, this should include separate accounting, and the domain name should be carried as an asset on the books, and its cost should have been an expense. However, if you're doing a solid business (mid-5-digits+ annually) and the domain name is one of the only sloppy asset handling instance, that would not threaten your liability shield unless the lawsuit is about the domain name.

Just the same, you should establish a reasonable book value for the domain name (gosh, how 'bout what you paid?) and treat it on the accounting books as an LLC asset, and treat your personal cost for the domain as a cash investment into the business.

You can do that retroactively, since it's basically just a change in your accounting books. It has no effect on your taxes, because it's "pass-through" so the IRS sees it as the same anyway.

Note that the domain name is a business expense; you know what that means for deductibility.

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  • hi Harper, the domain name is an intangible asset, so my understanding is that if the LLC had acquired it, it must amortize it over 15 years. I was thinking that maybe I can write a check from the LLC to myself to "acquire" the domain so that the domain can go into the LLC's book as an Intangible Asset, and then I can amortize it and deduct the amortization from revenue. If I simply "treat it on the accounting books as an LLC asset, and treat your personal cost for the domain as a cash investment into the business," then I won't be able to deduct anything correct? Mar 13 at 7:43
  • You can have the LLC write you a check, that would be the cleanest way to do it. Mar 13 at 17:46
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Welcome new user. The good news is you are wildly overthinking it,

  • it's a startup cost

  • it's completely commonplace, indeed universal, to have "bought a domain" as a startup cost, and use the start-up-cost treatment

End of story.

Don't forget that anyway .. you know how with an LLC you should (of course! obviously!) have a separate bank account from yourself. Recall that you don't literally have to do that. It's one of those things that one has to do to demonstrate a certain accounting stance in the case that you get audited. It's completely normal that occasionally someone "uses the wrong card," and indeed it's perfectly normal in the case "the business account was not set-up yet".

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