True, any business expense (including R&D) is written off. You only pay tax on end of year profits.
Speaking of R&D and someones notion that R&D cost should only factor into a product that you're selling. What do you do when the product fails or never makes it to market? You certainly aren't paying for $10,000 of R&D with $12 markups on brake lines. We have dozens of failed or never released or unprofitable products. The money for these needs to come from somewhere. Usually it's made up with the outrageous markups (like tire inner tubes) we have on products where we purchased a vendors inventory when they went out of business or found a one time closeout on something no longer produced.
In the end it has to average out to a profit. During the months of November, Dec, and Jan, ZZP loses money. I have to borrow around 100k to keep the business going and make up for it during the profitable months. This is why you see woot sales and such on ours and other vendors web sites. At some point, we need capital to make payroll and keep bills paid. But this is also a risk. What happens if we come out with a differential that gernades and people stop buying from us? I'm left with 100k of personal debt I can't pay back. In that case, I would have been better off working for someone else w/o this type of risk. Taking that risk though means that I deserve the potential of reward someday. That is the only reason I take it.
