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I am currently writing a software/app and founding a startup. I have not form an LLC or any legal entities yet.

But I am about to pay a lawyer to draft a patent for my app.

Question:

  1. If I file as a person, would this fee be tax deductible somehow?
  2. Should I form an LLC first, and file under the LLC? Would that help with taxes?
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  • Get your lawyer to explain the difference between Patent, Design Patent, and Copyright, and why -- unless you have invented a process which is genuinely not self-evident to an experienced practitioner of the craft -- any patent application will be rejected in review. Even if you can get it accepted the defensible claims are likely to be very narrow. On the other hand, copyright for programs is easy -- in the US it's automatic, though documenting date of creation will make it stronger. WARNING: Patent must be applied for within one year after the date of first disclosure.
    – keshlam
    Apr 10 at 3:23
  • Have you consulted any real attorney yet? Patenting a software itself sounds pretty unlikely in the US.
    – xuhdev
    Apr 20 at 21:04

1 Answer 1

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to draft a patent for my app.

Are you sure it's not a scam? You might want to consult with another attorney on this, generally patents on software even if given are hard to enforce. But, irrelevant to this forum.

If I file as a person, would this fee be tax deductible somehow?

You'll need to talk to a tax adviser who's proficient in taxation of intangibles. You'll have them review the IRC Sec. 197, IRC Sec. 167, and IRC Sec. 162, and may be others, and the related regulations and revenue rulings and precedents. They'll give you their qualified opinion. There were some recent changes about the treatment of R&D expenses, so you'd be better served by a professional on this.

Should I form an LLC first, and file under the LLC? Would that help with taxes?

LLCs in the US are disregarded entities for tax purposes. LLCs have no bearings on taxes. If you elect to treat your LLC as a corporation for tax purposes then it would affect your taxes as if your business was a corporation. In any case, there's very little difference between what's an allowable business expense to an individual sole proprietor and a multi-billion dollars corporation.

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