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Posted by Paul Thomas, CPA on January 31, 2007, 8:39 pm
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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.
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@bellsouth.net
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