The thing is, the tax rates only matter if you are successful. Well, mostly. You mostly only pay taxes on profit. (there are exceptions, like payroll taxes, but those are mostly federal.)
I'd be happy to promise to pay a billion dollars if my company ever has more than two billion dollars on hand, if paying that billion makes it even slightly more likely that my company will become that successful in the future.
Face facts, as a friend used to say, your company will probably fail before it makes enough money to pay significant taxes.
And money on the upside? it's got diminishing marginal value. Making promises to give away some of the upside, if it gives you a better chance of getting to the point that there is a significant upside, often makes a lot of sense.
All that said, complexity matters a lot. I mean, until I start making money, I don't really care what the tax rate is - I'm not making much money, so I'm not paying much in taxes. But I'm paying my accountant, and even then, my accountant makes me think at least a little about taxes. And taxes are super complex.
When your company is small, you will spend more money figuring out how much to pay than you will spend on actual taxes. Complexity is a cost even when you are small and posting small profits.
Face facts, as a friend used to say, your company will probably fail before it makes enough money to pay significant taxes.
You're correct, but that's all the more reason not to move to a crazy expensive city like SF from wherever you are in order to start your (likely to fail) company. What I was saying is that if you feel physical proximity to the Valley is necessary and you are planning to relocate anyway, then Reno is probably the ideal choice. If you are successful, the upside is dramatically higher because there are no state taxes on your success. If you fail, the downside isn't as bad because your expenses are dramatically lower. You also have a higher chance at success if you aren't burning through your startup capital on monstrous expenses associated with being in the Valley.
A longer runway is, indeed, a very good reason for doing a startup in a low cost of living area, assuming your runway is primarily limited by cost of living expenses, which it often is.
>>> Face facts, as a friend used to say, your company will probably fail before it makes enough money to pay significant taxes.
I have a freelance business I'm working on getting off the ground. I have to pay quarterly taxes on the revenue I bring in. I just wrote a check for close to $900 on around $2500 of revenue I had taken in for two clients.
To me, that's a significant amount of money coming out of my pocket for taxes.
S-corp or llc? that sounds a lot like your income tax or equivalent (you pay something very much like income tax on profits for pass-through entities) - which is to say, if you were farming out this work to someone else, most of that tax bill would follow the money you are paying someone else to do the work.
At that much, I'd guess you are paying income tax at a rate that would indicate that you have significant other income.
Income tax/fica are the hardest to get around (and most regressive) tax you have to face, but if you wanna stay in America, there's not a lot you can do. (you can shave off something around ten percent if you want to leave California and move somewhere without a state income tax... but there's no getting around federal income and FICA tax.)
I'd be happy to promise to pay a billion dollars if my company ever has more than two billion dollars on hand, if paying that billion makes it even slightly more likely that my company will become that successful in the future.
Face facts, as a friend used to say, your company will probably fail before it makes enough money to pay significant taxes.
And money on the upside? it's got diminishing marginal value. Making promises to give away some of the upside, if it gives you a better chance of getting to the point that there is a significant upside, often makes a lot of sense.
All that said, complexity matters a lot. I mean, until I start making money, I don't really care what the tax rate is - I'm not making much money, so I'm not paying much in taxes. But I'm paying my accountant, and even then, my accountant makes me think at least a little about taxes. And taxes are super complex.
When your company is small, you will spend more money figuring out how much to pay than you will spend on actual taxes. Complexity is a cost even when you are small and posting small profits.