June 8, 2017
In a recent installment of BetaKit's weekly “Ask An Investor” series, investors Roger Chabra and Katherine Hague explore the question of where startups should incorporate. To help them navigate the incorporation landscape, they consult Osler partner and emerging companies expert, Chad Bayne, who offers some valuable insight on the subject. In addition to discussing the pros and cons of incorporating in various jurisdictions – specifically Canada and Delaware – Chad outlines considerations for Canada-based entrepreneurs.
"For Canada-based entrepreneurs,” he explains, “there are significant tax benefits that result from having a Canadian-controlled private corporation (essentially, a Canadian corporation either incorporated federally, provincially, or territorially) that is not controlled according to law, or in fact by non-Canadian resident shareholders or public companies." He goes on to discuss those tax benefits, including the scientific research and experimental development (SR&ED) tax credit regime, the capital gains exemption on the sale of shares of a qualified small business corporation and enhanced tax treatment for options granted to Canadian-resident employees.
Perhaps most importantly, Chad says that early-stage entrepreneurs should seek advice before deciding where to incorporate and suggests that “[s]ophisticated legal counsel with significant cross-border experience (both from a corporate and tax perspective) is in the best position to discuss and weigh the different [incorporation] options with the entrepreneurs.”
Read the full “Ask An Investor: Where should I incorporate my startup?” interview online at BetaKit.