Small Business Term: What Are Operating Expenses?

By Craig Anthony

0 min read

An operating expense, also called an operating expenditure or OPEX, is a cost that a business incurs while engaging in its day-to-day business operations. Examples of operating expenses include rent, inventory costs, payroll, insurance costs, certain supplies, utilities, advertising costs, property taxes, licence fees, maintenance fees on equipment, legal fees, and more.

Operating expenses are different than capital expenses in how they are treated for taxes. Businesses can usually write off operating expenses the year they are incurred. Capital expenses, on the other hand, are large costs associated with acquiring or upgrading tangible or intangible capital assets. Usually, capital expenses must be written off proportionally over a period of years.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

What Is a Term Sheet?

From investors to freelance graphic designers, it takes all kinds of people…

Read more

Using Your Accountant to Help Better Manage Your Working Capital

Your small business’ accountant is in a privileged position to help manage…

Read more