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Dear David,
Hope everything is going as well as possible.
I am going to invest in a capital pool company, CPC, matbe as an initial director.
Are there any advantages tax wise if I do it through
a. personally and borrow the money, although I do not have to borrow it to invest
b. do it through a proprietorship
c. incorporate the proprietorship
Do you know of any people, starting with yourself, that know all about CPCs and the advantages/disadvantages of being a director in the CPC and also being a director when we go public on the TSX Venture.
All the best IXXXXX
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a. If you do not have to borrow it, then do not. However, if you do borrow it, the interest is clearly deductible and it leaves the capital free for personal; expenditures. You should likely borrow it unless you KNOW you have nothing personal to use it for in the future.
b. Proprietorship is good if it loses money. Likely better if it makes money as well.
c. Not likely. Holding companies pay the highest tax rates.
The only advantage of being a director is a possible personal vanity and prestige factor "if:" it is succesful.
Do not do it if there is not a substantial "director's liability" insurance policy in place BEFORE you become a director.
The disadvantages are numerous including personal director's liability for payroll withholding taxes and two months of employee wages if the deal goes bad. You can also be held liable for environmental damage and other investors' losses if they decide that you acted improperly as a director.
Then, of course, there are the newspaper articles if David Baines decides that the project was bad enough. It is hard to get good publicity, easy to get bad publicity.
That's off the top without knowing any details of the individual deal. It is my experience that many, if not most CPC's end up in the red with disappointed investors.
Thanks for the good hopes!
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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