One thing that has never come up, in any of the thousands of conversations I’ve had with other entrepreneurs since building Next Big Sound, is tax rates. It could be my age, stage of company, the type of people I meet with around the country, or my naïveté, but not once have I heard anything close to “well I was looking at starting a company but the business tax rates were too burdensome.” Or, “I was deciding between accepting a full time job offer or building my own company and decided to take the full time offer because I’m worried about the projected future corporate tax rates.”
I’ll take a minute to specify that I’m talking about high-growth startups and not small consulting firms, single-location retailers, mom and pop stores, restaurants etc. I haven’t had nearly enough meetings with those entrepreneurs to understand how tax rates factors into their plans. I imagine taxes factor in much more heavily.
The thing about technology startups is that corporate taxes are a GOOD problem to have. It means you have a profitable business.
Not only that, as venture backed startups you have carry-forward losses meaning that the amount of money you lose each year is totaled up and carried forward to each subsequent year so you only start paying taxes once that number is above zero.
If potential future tax questions are your excuse for not starting a company I can give you several other ones far more likely to derail your business in the fragile, early years: potential employee lawsuits, patent trolls, labor and hiring violations, accounts receivable collections issues, manipulative investors, competitors who don’t play fairly, immigration issues for key employees, inflation, high opportunity cost for you and your co-founders, or depleting all your personal savings and retirement accounts to keep your business alive. I could keep going.
There are hundreds of reasons not to start a company as a first time entrepreneur. The odds are stacked enormously against you, you have no idea what you’re getting into or how to handle most situations you’re about to face.
The good news is that you are confident in yourself, in your team, in your product or idea, and you’ll be able to handle whatever issues get in your way, taxes or otherwise.