Net Operating Loss (NOL)

A net operating loss (“NOL”) is a loss recognized in a period in which a corporation (including an LLC that has elected to be treated as a C corporation for US federal income tax purposes) has tax deductions in excess of its taxable income. This frequently occurs when a company has more expenses than revenue and is supporting its operations through funds raised in debt or equity financings. NOLs are subject to various limitations and exceptions. Companies and investors should discuss with tax advisors before making any decision regarding NOLs.

A video on this topic is available on Cooley’s Taxplaining page.