Start-up Cost
Expenses incurred when establishing a new business or expanding into new territory, typically expensed rather than capitalized under accounting rules.
Start-up Cost
Expenses incurred when establishing a new business, opening a new facility, introducing a new product or service, or expanding into new territory before normal operations begin.
For example, a restaurant startup might incur pre-opening costs including $50,000 for market research, $25,000 for initial staff training, $30,000 for legal entity formation and permits, and $40,000 for advertising before opening day.
Start-up costs typically include market research, employee training, legal and consulting fees, promotion and advertising, and facility preparations. Under accounting standards, most start-up costs must be expensed as incurred rather than capitalized, even though they relate to future operations. This treatment recognizes the uncertainty of recovering these investments and results in higher expenses during the establishment phase, potentially creating early operating losses despite the long-term nature of the expenditures.