Starting Your Business/Keeping Tax Records

What are Business Expenses

Franchise Payments

Franchise, trademark, trade name. A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area.

If you buy a franchise, trademark, or trade name you can deduct the amount you pay or incur for the transfer as a business expense only if the payments are part of a series of payments that are:

1. Contingent on productivity, use, or disposition of the item,

2. Payable at least annually for the entire term of the transfer agreement, and

3. Substantially equal in amount (or payable under a fixed formula).

 

Important references

Publication 535                 Business Expenses
Form 1040 Schedule C    Profit or Loss from Business Expenses