Blogs

  • 25 Oct 2020 by Randy Fisher


    Source: Investment Capital Program Guidelines 
    The BC EBC (eligible business corporation) tax credit supports investment in high risk early stage. It is available to friends & family investors (after the first $25,000), angel and private equity investors. 

     

    Eligible Business Corporation (EBC)

    In BC, one of the first thing that investors want to know after you piqued their interest is if your startup is an Eligible Business CorporationBC residents get a 30% tax credit when they invest in an EBC-eligible business. They can further reduce the costs of their investment by using the RRSP deduction of up to 49.8% depending on their tax bracket (i.e., 30% EBC + 49.8% RRSP tax benefit, making it close to 80%). Investors who want to diversify their current RRSP or TFSA investments can also receive the 30% tax credit - and should speak to their tax advisors for the details.

    Startup founders can find information about applying for EBC status on the BC Government website

    “Under the 'direct' investment model, a small business registers as an Eligible Business Corporation. EBCs can accept equity capital directly from investors without having to set up a venture capital corporation (VCC). This investment structure is ideal for an investor planning to be actively involved in the growth of the small business.

     

    A Mutually-Beneficial Partnership

    VANTEC has partnered with Western Pacific Trust (WPT) as it can help startup founders and investors benefit. Unfortunately, most wealth managers and banks can’t help with this significant opportunity; so WPT has developed a specially-structured investment account that enables investors to have eligible private capital investments in their RRSPs and TFSAs. This saves a ton of effort - and makes raising money easier and faster.

     

    Startup Funding Makes Economic Sense

    “It’s one of our best kept secrets,” says Alison Alfer, President and CEO, Western Pacific Trust. “We help startups and founders raise capital more easily by making their story and pitches more attractive to their investors.” “This opens up a whole new pool of capital to the founder,” she says, “because banks and brokerages don’t let you put a private investment into an RRSP.” 

    Many people know others who have substantial funds sitting in the bank earning next to nothing. They can choose to diversify their portfolio and gain higher risk and higher reward and invest in BC Companies.”

     

    Independent Trust Company

    Established in 1999, WPT is an independent trust company that provides financial services to corporations and individuals. The company offers its services in all provinces except Saskatchewan and Quebec. “We specialize in working with startups,” she says. We’re working hard to educate the community about this important mechanism to raise capital.” 

    To get started, founders have to properly set up their investment account. An application to the WPT Onboarding Team gets the ball rolling. After a short review process and documentation, founders can focus on raising money. 

    “It really builds trust and credibility with investors,” says Alison Alfer. “When you’re raising money, it’s critical to think about investors’ needs. They want - and need - an investment vehicle that easily and legally holds private capital investments in their RRSPs and TFSAs. Investors reap the myriad of tax benefits from investing, and saving.  “It makes it so much easier for founders to raise money, and for investors to use and leverage the funds in their RRSPS and TFSAs. Everyone wins.

     

    The Process for Founders

    1. Register as an Eligible Business Corporation (EBC) to provide investors with a 30% BC provincial tax credit.

    2. Enable investors to invest in your company via their RRSP and or TFSA. Contact the WPT Onboarding Team to set up an investment account. There’s a short review process (approx. 10 days) and a one-time fee of $1,000+ tax (full refund WPTC does not accept the application).

    3. After WPT approves the account, the Founder can go out and pitch his / her company as an eligible investment with the option to invest in via their RRSP or TFSA.

     

    The Process for Investors

    1. Set up your RRSP / TFSA at Western Pacific Trust to ensure that your private investments are eligible for tax benefits as stated in the Income Tax Act.

    2. Invest in startup companies, and take advantage of the 30% EBC tax credit.

    3. Shelter the growth in the investment, and get an RRSP refund.

    4. WPT handles all of the reporting. 

     

    To learn more:

    Website: BC Eligible Business Corporation Guidelines  | Email: InvestmentCapital@gov.bc.ca | Phone: 1 800 665-6597

    Website: Western Pacific Trust | Email:  aalfer@westernpacifictrust.com | Phone: (604) 683-0455