Reply To: Advice on Business Entity and SBIR Relationship
Hi! Thanks for reaching out. Here are the answers from our Accounting & Compliance team:
Q1 – Yes, company B is considered eligible, and the tax liability to company C from the grant would come from the budgeted amount in the award allocated to them. Just make sure company A is listed in the budget justification.
Q2 – Based on the information provided, Company C is also eligible for the SBIR award as long as the budget clearly lays out the employees and contractors on the grant. The preferable pathos Path 1 with the owner of company B listed as the PI and over 51% employed by Company B
Q3 – The granting organizations strongly suggest an S-corp formation (or LLC filing as an S-corp) to meet the requirements of all employees on the grants being paid through W-2 (including owner/PI)
Q4 – You would need to read through the FAR (FAR 31) to read what is allowed versus unallowed.
Q5 – Yes, you can use fees to cover the taxes. The Fee income is used for any costs including federal income tax.
Q6 – Yes, it is required for an SBIR that the PI be employed 51% by the company receiving the grant.
Q7 – Yes, you can have capital equipment as part of an SBIR submission. These reimbursements are handled differently under grant versus tax accounting.
Q8 – Yes, we have dealt with these types of relationships.