Gagik A
Freelance SW development, doing quality projects on time and on budget. I know how to do software production effective.
What you think of this type of investment for startup?
What you think of this type of investment for startup company?
Investor will pay all government taxes of startup company during some time, for example 3 year, the company will return the investment on next 3 year.
I think this very trusted investment, because company will have to pay some taxes if doing some real business. Am I right?
I want to offer this idea in my country, just need your advice. Thank you.
Clarification added 2 months ago:
First of all I think this type of investment can be effective for company if investor will pay for all taxes :
1. If company will import some equipments they will pay custom tax, or if they will buy from local market the on price included some percentage of government taxes.
2. If company have a employees then they will need to pay some social taxes
3. If company have earning then also some taxes.
I guess this kind of investment should be some thing like 20%-30% of company budget.
I thought that, each year company will present investor report of paid taxes or should be paid for current year activity, which investor will invest ass compensation of company expenses.
Clarification added 1 month ago:
Thank you for your replies.
Actually I thought that this idea could be helpful for startup companies. Because as we know its hard to find investor for startup as untreated investment. About question of “investment on fact”. I think this is have a easy solution, company and investor can have a “up to” limitation agreement for each year.
Answers (8)
Would depend on what their expectations are outside of the "loan of cash".
Control, influence and percentage of return can really hamper an aggressive visionary.
Tennyson E
8 Sided Films/Unified Pictures
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Is it the same investor for all three years? Seems like the investor won't know how much money they're committing to when they make the commitment.
What is it that's keeping you from being able to afford your taxes? Seems like finding investors to cover fixed costs, rather than variable costs, is the more stable way to go.
To me, it seems like asking an investor to cover variable expenses related to your income, like taxes, is just a way to cover your insecurity that your income won't cover operating costs. Figure out what those costs are, and set realistic goals. If you need to capitalize, do it with the knowledge of what those investors are paying for.
Sourav Sam B
Wipro Technologies
Best Answers in: Education and Schools (1), Change Management (1), Quality Management and Standards (1)
1. This appears to be a back-seat-driver kind of investor. They will only pay for the taxes if/when the core business is operative and presumably funded by someone else.
2. There is a certain amount of distrust or lack of confidence in the investor's mind. They are saying -- we do not want to be first in line, but if you do have others and are doing well, then we will pitch in for the taxes.
3. It would hard to estimate the investment amount. Plus, a good tax attorney can make the tax amount widely vary. So, does the investor know/care how much they are agreeing to pony up.
Very interesting thought process, though.
IMHO only.
Jeffrey H
Business Development at Academy Leader, Inc.
Best Answers in: Starting Up (3), Planning (1), Telecommunications (1)
Gagik. I would certainly need much more detail than offered, but could it be that the "investor" would be taking a participation based on paying taxes that will not likely be assessed during the first years in operation? A fascinating proposition, if that is what you are hinting at, and one with a significant potential of excitement and surprises. I'd give this type of "investment" two red flags and one caution yellow. ;-) I'd really like to see the detailed proposal, though. It would add to my body of knowledge.
-JH
Nay Lin M
Cashier at Henley Restaurants, Inc
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I think that these kinds of investment are good offer.
In contrast, I think that something is not right.
Please consider before signing any agreement.
I will tell you why?
Investors will pay all of taxes for three years.
What about labor costs, utilities cost and maintenance cost, who will pay these costs.
Investors or owners
After three years, owners run by them-selves.
One question to ask after three years investors will leave the company.
Is it right or not?
What kinds of industries do you like to run? [Big or small businesses]
I think that when you run big businesses, you do not need to worry about paying taxes because labor costs, utilities costs, maintenance costs and quality costs to handle products are more expensive than paying taxes.
In contrast, if you like to run small businesses, you do not need to invite any investors because you could run your own businesses by your-self.
Csaba B
advisor, "business angel" at Selene Outdoor Ltd and at ARTEON INVEST
Best Answers in: Starting Up (1)
Hi Gasik,
Well, I think, it's an innovative idea.
If I understand you well, it's a kind of debt from the "investor" for the company. Not a fixed amount, because in the beginning of the term, nobody knows how much tax will be paid.
It means, the "investors" liquidity must be high, means has to have lots of cash (cash equivalents) which are costly. (I mean the opportunity cost is high). So, the requested IRR is also must be higher than a normal "debt".
The other thing, I would like to suggest you to think about is the way to use the money. It's dedicated to pay the tax, (logically payed after the end of the financial year). The money you will pay for tax cannot generate added value.
But if the investor can support the company in the beginning of the financial year, the company can multiply the value of this amount via it's processes, means that, the growth of the company and the wealth-creation capacity can be higher.
Other example:
The company generates zero profit. In this case the "investor" won't pay anything after the financial year.
But let's assume, in the beginning of the financial year, the investor can support the company. The company can buy more resources, with more resources can generates higher income, and higher profit. (ceteris paribus)
Again, it's innovative, the "marketability" is depends on the details.
Best, Csaba
I don't think sort of idea is a worthwhile one. If money is being given after the fact, presumably they are either a) profitable or b) have other funding.
In case a) what use is the investor paying after the fact? Cash infusion at random points seems to me that it wouldn't offer any real benefit. In b) It seems to me they might be better off just getting more outside investment in the normal structure.
I don't see this as even equal with traditional investment and cannot think of any type of company that this would benefit.
John H
Helping Executives in Transition. Free Consultation Service for those interested in exploring franchise ownership.
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From what I am reading in the clarification & original question. You are looking for someone to commit money for taxes on revenues that are not known?
Why wouldn't you just have them invest as a normal investor? Or are you trying to stay away from that model for some reason?
It is possible I don't understand this because I don't know what your goal is, are you looking for an investor or a partner?
How would either know what the possible outlay of capital would be? Do you have a formal proposal? Are there other investors involved?
.
