Technology Chartered Accountants inToronto

Technology companies are striving in the GTA.  From King West Toronto to Milton, there are new technology businesses that grow so rapidly so quick.  It takes one idea and talented qualified entrepreneurs to see an idea through to becoming the next big App that everyone is talking about.  As Technology accountants we see first hand on the issues that tech companies face from the accounting, finance and tax standpoint.

Many times in the early stages, entrepreneurs are focused on generating revenues and business development.  It is fair to note that most instances, the accounting and tax considerations are put in the back-burner until the business starts to grow and revenues are generated.  There are many things to be tracking to ensure that you minimize taxes and maximize your tax credits:

1) Consider Incorporating

It may be great idea to incorporate your tech business early on and ensure that your intangible or tangible assets are held in the company.  For tech companies having a good corporate structure set up will be needed when its time to raise financing and whether you have an Angel investor who may be interested in your venture.  It is also helpful to incorporate early on to avoid having to transfer your assets held as a sole proprietor to the new corporation set up using either a Section 85 rollover to avoid triggering capital gains.  This would result in more professional fees.

2) Loss Carry Forwards

Tracking your expenditures properly is important as any business losses incurred for the taxation year can be carried forward to future years when the company starts becoming profitable.  This is a great way to save taxes in the long run and ensure you can use the tax savings toward growing the business further.

3) Scientific Research and Experimental Development (SR&ED) Tax Incentive Credits

SR&ED tax credits represent a significant financial incentive for undertaking eligible activities and filing a corresponding SR&ED claim with the Canada Revenue Agency (“CRA”). The tax credits may be used to reduce your income tax liability with CRA or instead paid directly to your organization, subject to some restriction.  For Canadian-controlled private corporations, the SR&ED tax credit is a refundable tax credit which means the company will receive a cheque from the government for the amount of the tax credit.  Generally, expenditures that can be considered innovative and related to the research or enhancing the development of a product or processes can be claimed for the SR&ED credit.

4) Financial Modelling and Pitch Book

Before getting to the stage of raising capital via the Series A round, a tech company would need to create an presentation deck and financial models to support their business model and opportunity.  Developing a sound financial model that can be supported would be something an investor will look at when considering on investing.  Essentially, there are 3 things that an investor will consider when investing: 1) the idea and business concept 2) the management team and their competence and the 3) the numbers.

For more information, feel free to contact an MP Group professional.

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