Maximizing Tax Benefits of Angel Investing and SR&ED Claims

Tax Effective Angel Investing Strategies – Proper Structuring for Angels / Early Stage Companies and Maximizing SR&ED Benefits Lawrence Weinstein, LaBarge Weinstein Jim McConnery, PricewaterhouseCoopers

Three terms to remember: Introduction ,[object Object],[object Object],[object Object]

CCPC ,[object Object],[object Object],[object Object],[object Object],[object Object],a corporation that is CCPC definition:

CCPC ,[object Object],[object Object],[object Object],[object Object],Advantages of being a CCPC:

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],SBC

[object Object],[object Object],[object Object],[object Object],CGE: Qualified SBC (QSBC) share

[object Object],[object Object],[object Object],[object Object],[object Object],QSBC: Ownership test

[object Object],[object Object],[object Object],[object Object],QSBC: Asset test

What is a family trust? ,[object Object],[object Object],[object Object],Family trusts

Why use a family trust? ,[object Object],[object Object],[object Object],Family trusts

Why use a family trust? ,[object Object],[object Object],[object Object],Family trusts losses trapped attribution kiddie tax 21-year deemed disposition ALERT!

Ways of investing: ,[object Object],[object Object],[object Object],Method of Investment

Debt Characteristics ,[object Object],[object Object],[object Object],[object Object],Method of Investment: Debt

Share Attributes ,[object Object],[object Object],[object Object],[object Object],[object Object],Method of Investment: Shares ,[object Object],[object Object]

US Investors US Venture Capital ,[object Object],[object Object],[object Object]

US Investors US Venture Capital: A Solution ,[object Object],[object Object],[object Object]

US Investors Exchangeable Shares: Day 1 Company Delaware votes & value Canadian Shareholders votes value US VC US Canada value votes

US Investors Exchangeable Shares: On Exit Company Delaware votes & value Canadian Shareholders votes value US VC US Canada value votes

US Investors Exchangeable Shares: Benefits ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],SR&ED: What is it?

SR&ED: Benefit rates No refund available 20% Others 40% 40% 20% Individuals 40% 100% 35% Canadian Controlled Private Corps. Rate of Refund Current Capital Investment Tax Credit (ITC) Rates

[object Object],[object Object],[object Object],[object Object],[object Object],SR&ED: Requirements

SR&ED: Common areas that companies overlook ,[object Object],[object Object],Specifically denied under the Act Quality control and testing ,[object Object],[object Object],Using standard approaches to customize Application or field engineering ,[object Object],[object Object],Work relates to commercial activities not SR&ED SR&ED on the shop floor Need to Demonstrate Challenge Missed Areas

SR&ED: Common areas that companies overlook ,[object Object],[object Object],Not used all or substantially all for SR&ED Servers, data storage - need to show link to current projects Relates to future projects and therefore not eligible Technological planning ,[object Object],[object Object],CEOs and Presidents do not do SR&ED Management Contribution to direct supervision and technological planning Need to Demonstrate Challenge Missed Areas

[object Object],[object Object],[object Object],[object Object],[object Object],SR&ED: Understand the service standards

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],SR&ED: Watch the size thresholds

[object Object],[object Object],[object Object],[object Object],[object Object],SR&ED: Remuneration of owner manager

[object Object],[object Object],[object Object],© 2005 PricewaterhouseCoopers LLP, Canada. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, Canada, an Ontario limited liability partnership, or, as the context requires, the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. Thank you © 2005 LaBarge Weinstein Professional Corporation

Maximizing Tax Benefits of Angel Investing and SR&ED Claims

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