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If your payroll ends up being about the same, after 5 years it all evens out in the sense that you will be expensing 100% of your payroll each year (but the exp
by achenatx 1y ago
If your payroll ends up being about the same, after 5 years it all evens out in the sense that you will be expensing 100% of your payroll each year (but the expensing will be 20% from each of the prior 5 years).
If your payroll is quickly growing You experience the problem on all payroll growth.
If your payroll is decreasing, you get a tax benefit. Your outgoing cash is less, but you are getting deductions from prior year expenses.
- bequanna 1y agoYour not taking into account the time value of money. You always want to expense sooner. Additionally, having to wait 4 additional years to deduct that 80% is a huge drain on capital. Combine this with higher interest rates and the effect is essentially pouring sand into the gears of the tech industry.
- aoeusnth1 1y agoNo, it's always strictly worse because you could have bought bonds or deployed the capital in some other way with that money.
- dustbunny 1y agoSure if you big enough to ride out 5 years but if your a hungry struggling bootstrapped startup, this can be game over.