taxes, accounting, seed, delawareMy startup is a Delaware-C-Corp, we just received some investment through a SAFE convertible note.
Does this investment count as income for the company? Will my corporation have to pay corporate income taxes on this? (e.g. 15-40% of taxes?)
A Convertible Note such as the SAFE I used is considered a Loan. And hence is not an income.
Thus it won't be taxed.
Here's an answer I found on this reddit
We wound up hiring an accounting firm to help out with our tax situations, but this advice courtesy of a tax question message board, proved true:
These agreements do not create "income" event and the offset to the cash received is not recorded in the "income and expenses" section of your general ledger. These agreements are essentially "rights" offerings and they they only affect the "equity" portion of your general the balance sheet, and cash.
(Accounting-wise the entry associated with this deal is a debit - increase - in cash in bank, and a credit - also an increase - in a "rights outstanding" account in the shareholders' equity portion of the balance sheet.). The SAFE primer makes this very clear:
"In the meantime, an outstanding safe would be referenced on the company’s cap table like any other convertible security (such as a warrant or an option)."
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