For every successful business I’ve started, or investment I’ve made, there have been multiple failures: businesses that never took off, investments that went to zero, and times when I was super gung-ho about something, only to have it end up in my Bad Idea Hall of Fame. Want to know more? Let’s take an honest trip down memory lane.
The Kickoff
The first one that comes to mind takes me back to my college years, when I was about 20. I was still in school at the time, and really into kickboxing, which was just becoming popular, with studios popping up everywhere. One day, I had a lightbulb moment for how I could monetize the kickboxing trend.
I bought the domain name Kickboxing.net with the plan of building an online directory of kickboxing studios. To fill out the front end of the site, I put up a bunch of content around the sport, but that was the easy part. The more labor-intensive work was creating the software that would pull information from a database about different locations. During my limited free time, I programmed the whole thing, spending probably about four months on it.
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When most business owners hear “taxes” they either stop paying attention or only think about how much in taxes they’re going to owe. However, Research & Development (R&D) Tax Credits are something every entrepreneur & existing business owner MUST understand and utilize. Many expenses that qualify for R&D Tax Credits are expenditures that your business is already encountering which you may not be capitalizing on. Having a thorough understanding of the following rules & ideas can save your business a lot of money each year in taxes.
Let’s start by understanding the difference between a tax credit and a tax deduction. Tax credits are more valuable because they are a dollar for dollar offset of a tax liability. In contrast, a tax deduction simply reduces your taxable income before the tax rate is applied. A tax credit directly reduces your tax liability in the amount of the credit, whereas a tax deduction only reduces a portion (your tax rate) of your tax liability. Because certain R&D costs are treated as a tax credit rather than a tax deduction, the tax savings are much larger for your business.
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