One thing you need to mention:

The right accountant and the right family situation means that you don't pay taxes on the first N * $750k, where N is the number of family members you have.

It gets really complicated but essentially you can set up a family trust in Canada that owns a certain class of shares, or even a holding company that holds the shares and then when you sell the company every person in the family trust uses up their one time $750k credit. You can do this with friends you really trust as well, so it isn't always a case of Delware company. This is a brief introduction, that makes sweeping generalizations.

My very good friend is a CA that focuses on technology companies with PWC in Toronto. If you need introductions he is phenomenally good and gets it. He took 3 years of Comp Sci at Waterloo before getting bored of it and switched to accounting.

Carl, thanks, great article.

One question: you say "Because QC-inc is just like any other Canadian entity, it was eligible for SR&ED."

But if QC-Inc was doing consulting work, i.e. developing products & technology on contract for another entity (Karabunga), then that work would not be eligible for SR&ED -- an entity isn't eligible unless it retains the IP rights.

How did you work around that?

I was curious how the Quebec based consulting company qualified for SR&ED expenditures since all of the IP was owned by a US based corporation. I didn't realize that a Canadian consulting company working on a US R&D project could quality for SR&ED.

The dual ownership trick by an individual is great. Lots of awesome details and tips. Thanks!

I am confused about the Franchise Tax. If I'm a internet business, with no office in Delaware, do I need to pay franchise tax?

Anybody know why to avoid the "sandwich"?