"whimsica" <whimsica[at]aol.com> wrote:

- quote -

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

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whimsica wrote:

- quote -

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

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"whimsica" <whimsica[at]aol.com> wrote

- quote -

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
paulthomascpapc[at]bellsouth.net

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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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