Startup or Small Business Strapped For Cash? Why the R&D Tax Credit Should Be On Your Radar

For startups or small businesses in the early stages of growth, success hinges on the ability to generate short-term cash flow and operating capital. In navigating the myriad of financing options, businesses frequently overlook a potential non-dilutive source of funding: the research and development (R&D) tax credit. What is the R&D Credit? Originally enacted by Congress in 1981 as a mechanism to stimulate growth in the U.S. economy, the R&D credit is a tax incentive available to businesses of any size and in any industry that develop new or improved products (including software) or processes. Businesses that engage in eligible activities can claim a federal R&D credit of up to 10 percent of amounts paid for salaries, supplies, and contract research related to development efforts. Further, most states also offer corresponding R&D credits that can be as lucrative as the federal credit. The federal and state R&D credits may be used to offset income tax…

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