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technology companies

tech research

3 Ways to Fund Your Tech Company’s Research Activities

By | Innovation | No Comments

Research plays a vital role in the evolution and success of tech companies because it promotes sustainability. As such, your tech company’s research can give it a competitive edge in the market by helping you develop plans that spearhead innovations. That implies that creating solutions for future problems that you can predict becomes a possibility through research.

So, if you want to speed up the growth and evolution of your tech company by introducing innovations and breakthrough products in the market, investing in research activities for your tech firm is critical. It is a fact that tech entities grapple with the highest expenses for research, and the cost can amount to billions of dollars for large organizations.

On the other hand, research expenses can be minimal for small tech businesses, yet they are still vital for the success of such establishments. The competitive nature of the tech marketplace is one of the reasons why it is difficult for individuals to finance research initiatives. Here are some of the funding options you can consider for your tech company’s research activities.

Approach Angel Investors

One of the reasons why you should consider seeking funding for your tech firm’s research initiative from angel investors is that these individuals have a high net worth, and their annual income is also huge. Most angel investors are open to new ideas. They typically operate alone, but may also join with others to form a fund.

Before approaching an angel investor, you must put together a solid business plan and a great pitch. Capturing the attention of an angel investor with enthusiasm and promising data points about the current situation and future potential of your tech business is what will help you secure the funds you need for your research activities.

Angel investors fund your company in exchange for a return on investment. You also need to ensure that your finances are in order and that your management team is competent. The reason is that these are some of the factors which determine whether an angel investor will invest in your tech operations or not.

Additionally, the personality of the angel investor you choose should be in sync with yours. That way, the two of you will get along for the benefit of the initiative you need to finance. Giving an angel investor as much information as possible allows them to make an informed decision regarding investing in your research operations.

Consider Crowdfunding

Online crowdfunding sites help individuals finance inventions, businesses, and projects. They make this possible by bringing various people together who are ready to cooperate and support organizations or entrepreneurs to attain a particular goal. In that case, you need to research such sites to understand the projects they finance.

When seeking funds from crowdfunding websites to finance your research, you need to consider publicizing your initiative to friends and family. The support you get from such persons can spur other people to contribute to your cause. You also need to assess traffic, payment methods, social networking provisions, and fees before opting for a particular crowdfunding site.

Seek Assistance from The Government

The federal government can step in and fund your tech company’s research initiative depending on the nature of your invention. For example, if your research project focuses on a positive impact on the environment or saving energy, you can approach the Department of Energy for funding. Remember to research the requirements of the program you are pursuing to gain insight into the guidelines that government agencies have put in place.

Accessing federal funding for your tech company’s research activities implies that you will be in a position to compete favorably with large firms.

Winning the confidence of the investors or the agency you are seeking funding from is paramount if you do not want your project to stall. If you need more information on ways to fund your tech company’s research activities, contact us today.

tax credits technology company

3 Key Tax Credit Tips for Tech Companies

By | Credit, Tax Credits | No Comments

Running a business is inseparable from paying taxes. As a tech entrepreneur, you must be aware of your tax obligations starting from City Hall up to the federal government.

To keep your taxes under control, you should understand which taxes your firm must pay, the amount of outstanding taxes, and the when to file.

A small mistake can lead to your tax bills go through the roof. But by planning well, taking advantage of available tax deductions, and preparing your tax returns diligently, you can significantly save on the amount of owed taxes. This is where tax credits come in.

A business tax credit is a particular tax incentive that reduces the amount of taxes a business owes the government.  Business tax credits are available to companies when filing their annual tax returns with the International Revenue Service.

Benefits of Business Tax Credits to Tech Companies

To understand the benefits of tax credits to tech companies, we should break down business tax credits further. Business tax credits occur in varied forms. Available business tax credits include research and experimentation, investment, welfare-to-work, and work opportunity, just to mention a few.

Businesses must claim these tax credits by filing the specific forms for that tax credit on the IRS Website. Alternatively, you can seek the help of a licensed tax professional or an accountant. Keep in mind that the applicable tax credit forms and the available credits change yearly. So, before you file your tax returns, you should consult with the IRS website.

The main advantage of business tax credits is that they reduce your tax obligations. Preferably, you should try using all the tax credits you qualify for to reduce the amount of taxes you will incur during tax time.

What is more, if your business exceeds its tax credits for the prevailing tax year, you can apply them to the already filed tax returns. Better still, if you have excess tax credits in the present tax year, you can carry them forward to the subsequent tax year.

To make the most out of your tech company’s business tax credits, do the following:

Understand Your Tax Responsibilities

As an entrepreneur, you should be cognizant of all the local, state, and federal income taxes you might incur.

Your chosen business entity and the number of employees inform your tax obligations. Also, you might incur other local and state taxes depending on your local or state taxing authority.

Identifying all your potential taxes your business will incur will help you plan adequately and increase your business’ bottom line.

Know When to Involve an Accountant

Setting up a general business ledger is among the crucial things to do when launching a tech startup. Despite your activity level, involve an experienced bookkeeper to maintain your accounting records properly.

Accurate accounting records will come in handy when you are filing your annual taxes or seeking outside funding.

In the case of higher-level business activity, consider hiring a full-time internal accountant.

Understand the Available Business Tax Credits

There are a plethora of tax credits available to tech companies. The most popular tax credit is the research and development tax credit. You can use this credit to settle federal payroll taxes. Furthermore, it can be converted into cash in various states.

Understand how you can use these credits to your advantage to reduce your tax responsibilities.  

Given the uncertain business future, an overwhelming amount of taxes can sink your business. By taking advantage of available business tax credits, you’ll be better able to your tech business afloat.

Do you need help in filing your taxes? Contact us today to help you determine the available tax credits you qualify for. We will also advise you on how to cut your tax obligations for the benefit of your tech company. 

technology company tax burden

5 Ways Technology Companies Can Reduce Their Tax Burden

By | Innovation, Startup, Tax, Tax Credits | No Comments

Tax obligations are part and parcel of running a business. If your tech company is based in California, for instance, some of the taxes that you’ll have to pay include:

  • Income taxes
  • Employment taxes
  • Excise taxes

For years, tech companies have been slammed for failing to pay a fair share of taxes. However, it’s fallacious to make a blanket accusation to the effect that tech companies engage in tax evasion. Just like other businesses, these companies only devise ways of reducing their tax burden. 

From the local government to the IRS, tech executives should beware of all their tax obligations. This entails knowing how much tax you owe to different entities, when you should file, and the type of taxes that you ought to pay. Here are five strategies that a tech company can leverage to ease its tax burden.

1. Automating Tax Records

This sounds like a no-brainer, but some tech companies still take a casual and laidback approach to bookkeeping. Being proactive as far as bookkeeping is concerned could entail automating your records and books. Certain records are mandatory for you to take deductions. Without these records, expenditures might not be deductible. In this regard, here’s what you should consider doing:

  • Automate your books to track your company’s income and expenses. There are dozens of record-keeping programs that can help you do this.
  • Establish a file system to categorize your expenditure. Since some business expenditures are deductible, a system that categorizes your expenditure will help you determine and claim your tax relief.

2. Making Smart Tax Decisions

Under federal tax law, most business expenses are deductible. On the other hand, most income is taxable. Furthermore, the law also gives you options about when and to what extent you can report income or claim certain deductions. Being aware of these provisions can go a long way in helping you lessen your tax burden.

3. Staying Apprised of Law Changes

The American tax law constantly changes with significant legislation, IRS rulings, and court cases frequently emerging, thus altering the taxation landscape. Contrary to what you might think, these new developments are not meant to stifle your tech company. Instead, they present tax opportunities that you can leverage. Staying apprised with law changes can help you act on such opportunities.

For instance, in the aftermath of Hurricanes Wilma, Rita, and Katrina in 2005, several short-term tax breaks were enacted to benefit both individuals and corporations. By leveraging such opportunities when they arise, you’ll be able to lessen your tax burden significantly.

4. Contributing to Retirement Plans

Once your tech company breaks even, you should consider sheltering its income in a retirement plan that provides you with tax deductions for your contributions. The added benefit to this is that providing employees with such a savings opportunity helps you gain their loyalty. In the long-run, you’ll be able to tax on contributions until you start taking money from the retirement plan.

5. Structuring Your Business Appropriately

This is perhaps the most overlooked aspect of tax planning. Often, tech companies that start small fail to change their business structure as they scale. For instance, you can gain significant tax benefits by structuring your tech company as a C corporation rather than an S company or an LLC. When you structure your company as a C corporation, the initial $50,000 of its income will attract a 15% tax rather than a 35% tax.

The Incentax Advantage

Every business owner deserves a tax break. However, few of them know about opportunities that they can leverage to pay less tax. Moreover, you can avoid clashing with state and federal tax agencies by outsourcing the expertise of tax professionals. For top-notch tax consultation and advisory, contact us today.