Is start-up funding taxable.

I am curious to how start-up funding works.

A company receives 7 million start-up funding from Venture Capital representing a 4 year start-up plan. How does the company protect this money from being taxed as income or profit? Obviously the start-up expenses for the company are not going to exceed 7 million in the first year, although on the books the company has just made 7 millions dollars. How does the company maximize the use of this 7 million dollars so that it is not taxed as income or profit. Thanks,

Dan

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Reply to
whimsica
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"whimsica" wrote

It's either a loan or capital. The documents that you will sign will tell you what type of investment this is (debt or equity). It clearly isn't for products or services and shouldn't be considered sales or revenues. There's a scary implication here that you don't know what's going on, and quite frankly no one is going to hand over $7 million if you don't know how to handle it. So do yourself a favor and find a local CPA to guide your accounting controls and reporting from the start.

-- Paul Thomas, CPA snipped-for-privacy@bellsouth.net

Reply to
Paul Thomas, CPA

Seven million eh? How did you get ahold of all this free money? It IS free isn't it? I mean, you don't have to pay it back? Usually "venture capital" from one of those type companies means that they invest in the company, either by buying stock in it, and/or lending the money which has to be paid back. Perhaps you need to sit down with competent local accounting help, either a CPA or an EA in your area who can explain the ins and outs better than we can here electronically. ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

Capital funding is not income, so there is no income tax on it. It's just that simple. Now if some of this capital was in a form of in kind property the investor may have an income tax problem. But not the company - at least not until whatever it is has been sold. Stu

Reply to
Stuart A. Bronstein

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