CPA Services for NJ Startups & Technology Companies

Frequently Asked Questions

Should I form a Delaware C-Corp or a NJ LLC?

If you plan to raise venture capital or seek institutional investment, a Delaware C-Corp is almost always required, investors expect it, and the legal ecosystem (preferred stock, QSBS, 409A valuations) is built around it. If you are bootstrapping, building a lifestyle business, or want pass-through taxation, an LLC is often simpler and cheaper. The right answer depends on your funding and growth plans.

What is the R&D tax credit and does my startup qualify?

The IRC § 41 R&D credit is a dollar-for-dollar credit for qualifying research and development expenses. Pre-revenue startups can use up to $500,000 of the credit annually against payroll taxes (rather than income taxes), making it valuable even for companies not yet profitable. Qualifying activities include software development, product engineering, and any activities that involve experimentation to resolve technical uncertainty.

What is QSBS and why does it matter for founders?

Qualified Small Business Stock (IRC §1202) allows early investors and founders in C-Corps to exclude up to $10 million (or 10x basis) in capital gains from federal income tax when they sell their shares, if the stock was originally issued by a qualifying C-Corp with under $50 million in assets and held for at least 5 years. NJ NOTE: Effective for sales on or after January 1, 2026, NJ conforms to the federal IRC §1202 QSBS gain exclusion under P.L. 2025 c.67. The NJ exclusion follows what the taxpayer can exclude federally under Section 1202; some prior commentary suggested an 80% NJ-payroll requirement, but that condition does not appear in the enacted statute - verify current text with your CPA before claiming. For sales prior to January 1, 2026, the gain was fully taxable in NJ regardless of federal QSBS qualification.

What is an 83(b) election and when must it be filed?

An 83(b) election allows founders or early employees who receive restricted stock to elect to be taxed on the current (low) fair market value rather than waiting until vesting. It must be filed with the IRS within 30 days of receiving the restricted stock, no exceptions. Missing the 30-day window permanently forecloses the election. If the company's stock value increases significantly during the vesting period, the 83(b) election can save substantial taxes.

Does NJ tax SaaS revenue?

Generally NO. Per NJ Technical Bulletin TB-72 (July 2013), 'most charges for SaaS are not subject to Sales Tax' in New Jersey. SaaS delivered electronically is generally exempt; a limited exception exists where the offering functions as a taxable information service under N.J.S.A. 54:32B-3(b)(12). Tangible/physical-delivery prewritten software remains taxable under N.J.S.A. 54:32B-2(g). Note: 'NJ TAM-2013-10' is sometimes cited in industry press but does not exist - the actual NJ guidance is TB-72. If your offering includes a clearly taxable information-service component, the Wayfair economic nexus threshold ($100,000 in NJ sales or 200 transactions) determines when registration would be required for out-of-state sellers.

What is the NJ Angel Investor Tax Credit?

The NJ Angel Investor Tax Credit Program (N.J.S.A. 54:10A-5.30) provides a base 35% NJ income tax credit to investors who make qualifying investments in NJ-certified emerging technology businesses, raised from the prior 20%/25% schedule effective Jan 1, 2026 per S-3189/A-2365. A 40% bonus credit applies for investments in qualified businesses certified as minority-owned (MBE), women-owned (WBE), or located in a New Jersey Opportunity Zone. To enable NJ investors to claim the credit, the startup must be certified by the NJ Economic Development Authority (NJEDA) as a qualified NJ-based company. The certification process involves an NJEDA application, and investors claim the credit on their NJ income tax return (subject to per-investor annual caps administered by NJEDA).