The "Delaware - Canco Straddle" For Canadian Tech Start-Ups

Canadian start-ups, including those in the information technology sector (i.e. mobile apps, computer software and other information technologies ("IT")) may benefit from certain tax and corporate advantages of operating both a Canadian corporation ("CanCo") and a U.S.-based corporation (often a Delaware corporation, "DelawareCo"). There are plentiful tax and capital funding incentives offered to tech start-ups operating in Canada, particularly in provinces such as British Columbia and Ontario, (i.e. with Venture Capital Corporations and Labour-Sponsored Funds). In order to exploit the advantages of operating on both sides of the 49th parallel, entrepreneurs are considering innovative strategies to take advantage of these unique incentives. For those CanCo's and their seed shareholders having some operations in Canada and some operations in the U.S., the "Delaware-CanCo Straddle" is becoming a favoured cross-border structure. The following explores why Canadian