The topic of taxes can be a dull one for many individuals and companies. However, the way a company keeps up with and adjusts to tax treatment can have a profound impact on the decisions and strategies that it undertakes. This is an important topic and we thought this article was an interesting one to begin to discuss the basics.
Without proper tax treatment and allowances for deductions and credits, corporate taxes can eat away at a company’s profits, which severely hinders growth. Remember that you are likely paying a federal and a state corporate tax. The first place this will hit a company is in the hiring and retention of employees. The ability of a company to keep and expand its workforce is a key ingredient in being able to fulfill more orders and do more work. Productivity gains can only go so far.
A company’s location can be a key factor in how much tax is paid. Some states or regions give tax incentives to a company to relocate or remain within their jurisdiction. Others may raise taxes and force a company to move. The location of your company ought to be impacted by the tax incentives of the local government.
Research and Development is also an important area where a company can create tax incentives and allow for growth. This may also lead to a company moving on from a particular product or service and focusing on a new one. This may have short term detrimental impacts on individuals and growing pains for a company but if they pay off in the long run, are well worth taking.
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