Definition: a) is a taxation principle stating that if a company claims an expense should be legally deducted from its taxable income, then that expense has to serve a legitimate business purpose. If a company breaks this rule by trying to pose a non-business expense as a business purpose one, it will suffer from legal consequences.
b) is an expression meaning that the primary purpose of a company’s representative trip out of town is to conduct business operations with clients or business partners.
In a Sentence:
Under the new regulations of the business purpose rule, the company’s utility bills fall under it and can be deducted from our taxable income. This will help us save a substantial amount of funds each year and invest them in new equipment for our office.
It’s ridiculous that you thought that the business purpose rule would apply here. Your new car can’t be counted as a business expense just because you use it to drive to work.
Synonyms and related words: business rule, business purpose, business judgment rule, business requirement