The theory of globalization informs an entrepreneurship perspective that is free of borders. However, geographical parameters and the resulting political indicators can’t be neglected as they are among the defining aspects of business success.
More specifically, geographical parameters can be defined as the incentives that are provided by both the Fed and the individual state to promote business activity. Political indicators can be correlated with legislation or lobbying done to promote certain form of businesses such as green industries.
Creating and effectively using an incentive resource is an important agenda for an entrepreneur to survive in a competitive market, lower business costs and create additional revenue streams.
Understanding the incentive infrastructure
The incentive structure can be used in both customized and standard manner. A good example of a standard incentive would be tax deductions that are given for office buildings focused on conserving energy. The incentives are categorized under the Energy Policy Act of 2005 and are applicable in each state. The IRS has compiled a notice specifically for these deductions.
Likewise, businesses that use hybrid, electric and alternative fuel vehicles also have federally administered deductions, with regulations notarized by the U.S. Department of Energy. Such measures translate into lower costs and in some cases, a lower price of the final product(s) produced by these businesses.
A customized form of incentive may often be limited to a state or be confined to a specific form of business. A very recent example of this kind of incentive is that of ‘job creation’ and has been applied in a number of states including Texas, California and Iowa.
In such cases, business leaders and budding entrepreneurs can look at state sanctioned areas for business growth and make use of the funds to grow their business.
For instance, in the case of Iowa, a food processing company has been awarded $401,000 in tax credits to promote employment in the area. This type of a ‘bonus’ can be reinvested to create additional jobs and revenue streams.
Utilizing these incentives
Businesses should be able to identify exactly which incentives are available and then utilize them for cost savings. ADP.com points out that there are several job tax incentives and credits available today, and they can help offset costs for companies by lowering the tax rate. However, these can be difficult to identify, capture and defend; this is where businesses can bring in a professional business processing provider to take full advantage of available incentives.
According to the U.S. Small Business Administration, the tax rate for startups is progressive and varies from 10% to 35%. This is a major cost being incurred on a new enterprise. The usage of incentives can be employed to generate an ‘effective’ tax rate that has been reduced from the original amount.
An indirect method of utilizing tax and related incentives is through the usage of state sanctioned employment programs. The Work Opportunity Tax Credit Program is one such example in which enterprises are encouraged to hire from a target community.
In light of the ’08 recession, the Fed and various states have used tax incentives to address the issue of debt servicing and high unemployment. Therefore, entrepreneurs need to consolidate resources and determine what kind of incentives are available and how to save on costs.