How should a fee for raising capital be recorded?

by Susan Miranda 

If I pay a fee to an individual for helping raise capital for my start-up business, should that fee be expensed, capitalized as a start-up expense, or recorded as a reduction of the capital? What if the capital was raised for an existing and ongoing business?

Regardless of whether the fee was paid to help raise capital for a new business or for an existing one, it should be recorded as a reduction in capital. All costs associated with the offering (including fees paid to an agent, printing costs, etc.) are a reduction in capital. The larger fees should be noted in the offering memorandum.

Susan Miranda, CPA, is a sole practitioner. She can be reached at (949) 689-9687.

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