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Comment by timxpp | Hacker News Reader

Is saving a few % of taxes that important for an IT company?

A high tax jurisdiction will charge, often, %40 of profits at the corporate level and then another %40 at the personal level. So, for every $100k you bring in, corporate taxes reduce it to $60k and personal income taxes reduce it to $36k.

A low tax jurisdiction would might charge %10 corporate taxes and %10 personal taxes, meaning that for $100k in income you're left with $81k.

I think more than doubling your net income is worth consideration, especially if it means the difference between being able to afford to continue your startup, or having to go and "get a real job".

Choosing the best state based on tax considerations oftentimes reduces tax bill by at least 5% of your net profits. Now, lets say you are making 2M per year. 5% = 100K, which is more than enough to hire another programmer!

I would rather start up in a nice city andy worry about taxes once I'm making 2M a year in profits than risking to live somewhere less enjoyable without knowing if I will ever have to pay taxes anyway.

I agree with the mentality to some extent, but taxes actually matter when you try to bootstrap without a steady income backing you

I'm bootstrapping in NYC, for which there are a multitude of taxes and other costs:

- Rent is insane, of course :)

- LLC Newspaper Publication requirement (why this exists is beyond me)

- Large sales taxes (although ST 121.3 ensures you are tax exempt on hardware)

You don't have to choose between a nice place and low taxes. high taxes and regulations can give you cities like detroit and chicago while low taxes and regulation can give you cities like hong kong, monaco, panama city, etc.

In fact, the point of my comment is that the business could be located in a low tax jurisdiction, resulting in more funds flowing to the bottom line, while the owners and employees could be located somewhere they like, even a high tax jurisdiction if they wanted.

It's apparently important for big corporations, but since a complex tax minimization scheme comes with huge setup and running costs, it's not really important for startups that are bootstrapping or seeking funding. I'd even say that a tax-optimized exotic setup would rather limit your funding opportunities.

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