Small Business Term: What Are Operating Expenses?

by Greg DePersio

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.

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