Crowdfunding at the Brooklyn Warehouse Harvard Case Solution & Analysis

The Brooklyn Warehouse, a stylish restaurant in Halifax, Nova Scotia, is overloaded for space as a motive for its status within its neighborhood and as a tourist place in the city. The restaurant is a private company with two shareholders, one of whom is not involved in operations. Because of the economical decline, the insecure temperament of the company and the reality that it has been open only four years, the owners are having trouble securing funding for their expansion strategies from their bank and other conventional lenders.

However, while negotiating a renewal of their lease in late 2011, their landlord offered to pay for half the expense of building a patio to grow the size of the restaurant. To raise the other half, the owners turn to crowdfunding as a way of raising capital through social media by tapping in their community of friends, family and faithful customers. In return for their donation, which might vary from $100 to $2,500, sponsors are offered various packages, including free meals, a business Tshirt and their name recorded on a wall of honour.

Nevertheless, little is known about tax treatment or the correct accounting for money raised in this way. The owners had heard horror stories about companies that used innovative ideas to raise capital only to have fines and penalties imposed by government agencies for income tax and sales tax or even by the Securities Commission for improper bookkeeping. The owners turn to their accountant for guidance.

PUBLICATION DATE: October 04, 2013 PRODUCT #: W13423-PDF-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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