As someone who has spent a lot of time in school and who even aspires to be a professor someday, a topic that often crossed my mind was –how do you survive as an academic?

Largely, it’s by securing funding to research your area of interest, whether it’s one to one theater or large hadron colliders. You start by applying for grants and funding endlessly – through academic resources and endless online searches.

This type of research and development funding goes on in the small scale for individuals like me, but also on a large scale for companies that need to continue innovating (like Apple or Johnson & Johnson… actually, companies that can invest the most in research and development are often front runners in their fields and usually pretty good investments).

However, these grants and funding are considered income and are taxed like it, so even though you planned on using every last penny for that research, the government wants a cut of it back. Large companies are brilliant at maximizing their tax benefits to minimize how much they have to pay in taxes.

So why does research and development (and how to fund it) really matter?

Investment in research and development actually benefits the economics of the country that the business is located in as a whole. Actually, a clear indication of living in a first world country is that the country produces innovations that the rest of the world wants to get their hands on.

Research and development grants also apply to small companies and inventors and these folks can even get tax breaks for the work that goes into innovating these new technologies too. If you’ve invented something new or are working at inventing something new, there could be a lot of great tax breaks available to you if your invention:

• Achieves an increase in overall scientific or technological knowledge or capability.
• Significantly improves products, processes, materials or services.
• Uses science or technology to duplicate the effect of an existing product or process in a new or appreciably improved way.

Grant writing is such an important skill in these fields because this can wind up being a hefty chunk of income for any business – and that, in turn, winds up affecting your tax liabilities. It can become a complicated circle.

Additionally, once all your research and development pays off and you have a brilliant new invention to introduce to the world, you have to run the patent gauntlet.

What is a patent?

It’s a legal certificate that allows the inventor of an item or new technology sole use of it for a set period of time. During that time frame, it is illegal for anyone else to use that item or technology without the permission of the patent holder. In the United States, United Kingdom and most of Europe, patents last for 20 years and then have to be renewed.

There are, of course, costs associated with patenting and renewing patents, that are the type of expenses large and small businesses, even individuals, can claim on their taxes too.

Have you ever thought about inventing something? The entire process can be a difficult path to navigate, both in the research and development aspects and the post invention-patent seeking aspects as well.

Good thing folks like Ben Franklin and Thomas Edison never got so bogged down they stopped inventing!

 

Source:

Prodan, Igor. “Influence of Research and Development Expenditures on Number of Patent Applications: Selected Case Studies in OECD Countries and Central Europe, 1981-2001.” Applied Econometrics and International Development. 5-4 (2005): 5-22. Web. 9 April 2015.