Accounting & Taxes

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Accounting & Taxes

Does carried interest qualify for QSBS?

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Community Member
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Dec 06, 2023

Top answer:

As long as all of the QSBS requirements are met, then carried interest would qualify for it.

 -  Rob Del Prete
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Accounting & Taxes

What's the difference between base and net management fees?

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Community Member
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Dec 06, 2023

Question came to mind after reviewing the accounting section of Decile Hub

Top answer:

The difference would only come if there were offsetting fees that would reduce the base management fees. The base management fees would be calculated from what is stated within an LPA.

 -  Rob Del Prete
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Accounting & Taxes

How are capital calls treated for tax purpose?

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Community Member
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Dec 05, 2023

Top answer:

Capital calls are not typically treated as taxable events. They represent the contribution of committed capital from limited partners (LPs) to the fund, which is then used for investments or to cover ongoing expenses. This is a transfer ...

 -  Haw Kuo
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Accounting & Taxes

When calling capital, does a VC state whether the called capital will go to investments or to management fees?

Asked by:
Community Member
Edited by:
Haw Kuo
on December 6, 2023
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Dec 05, 2023

Question edited for clarity. 

Top answer:

Venture Capital funds typically do not specify whether a capital call is for investment or management fees when requesting funds from Limited Partners (LPs). The capital call is generally used to cover both investments and ongoing expens...

 -  Haw Kuo
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Top answer:

Markdowns for a struggling portfolio company that hasn't raised funds in 3 years are determined by the valuation policy adopted by the fund. The valuation policy should provide guidelines on how to value such investments. This could invo...

 -  Haw Kuo
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Accounting & Taxes

Creating a capital call

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Community Member
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Dec 01, 2023

Hey all,  How to create a capital call, when I do not see it in the top menu of the capital accounts? Thank you all!

Top answer:

The fund admin functionality which includes the capital call tool is currently only available for Decile Partners firms. 

 -  Mike Suprovici
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Accounting & Taxes

What is a Trial Balance in decile hub?

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Community Member
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Nov 27, 2023

In the Accounting Section in Decile Hub, there is a section called Trial Balance after the list of items like Balance Sheet, Income statement. I have not heard of this term, what does it show?

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Accounting & Taxes

Should I call more capital than I need?

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Community Member
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Nov 16, 2023

Top answer:

No. Managers should only call the amount of capital that they need for current investments, fund expenses, and management fees. Excess capital sitting in a bank account without being deployed reduces the IRR of the fund. As a rule, manag...

 -  Adeo Ressi
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Accounting & Taxes

Options and Taxable Events

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Community Member
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Jul 23, 2023

Let's say you have a right to receive Pref Warrants from a Portfolio Company, but the company wants to change them to Common Warrants or Options that are a part of the stock option plan.  All things being equal (e.g. strike and number of options),...

Top answer:

As a VC, you should do your best to ensure that you get preferred equity. The reason that preferred is more valuable is because of special rights, that this class of stock receives and that's why it's more valuable. It's sub-optimal for ...

 -  Mike Suprovici
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Accounting & Taxes

Is a DCF (Discounted Cash Flows) method generally being used to calculate a startup valuation?

Asked by:
Community Member
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Jul 23, 2023

Since DCF method uses historical data to predict future cash flows of the company, this usually does not fit a startup since we have very little to no data on the cashflows. It is better to look for some benchmarks to tell valuation of a startup s...

Top answer:

Startup valuations are typically set by the market of investors. If there is a high investor demand, the valuation of the startup is typically higher. If there is low investor demand, the valuation of the startup is lower. If there is no...

 -  Mike Suprovici
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Accounting & Taxes

Regarding fund domiciling in Delaware for non US residents, should we set up the management company in another country to avoid paying extra US taxes?

Asked by:
Community Member
Edited by:
Adeo Ressi
on July 1, 2023
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Jul 01, 2023

What is the usual tax rate in the USA for non-US residents but who have a management company paying them a salary in Delaware? 

Top answer:

Most VC firms set up the fund, the general partner and the management company in Delaware, including firms with foreign Managing Partners. This provides a clear structure with unified control and governance, and it helps to manage costs,...

 -  Adeo Ressi
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Accounting & Taxes

Canadian Domicile in the US

Asked by:
Community Member
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Jun 07, 2023

One of my larger LPs can only invest in US entities, and my largest LP doesn't require but would prefer I domicile in Delaware. As a Canadian is that going to be an issue? Are there major tax issues I'll face? My wife is American, but not planned ...

Top answer:

Hi Scott, unfortunately it is not ideal for you as a Canadian to domicile your entities in the US. The reason being is that Canada does not recognize US LLC's as an entity type. You end up getting hit at a much higher tax rate on both yo...

 -  Zach Rosengard
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Accounting & Taxes

Are LPA fund expenses annual or 1 time?

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Community Member
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May 03, 2023

Are LPA fund expenses annual or 1 time?

Top answer:

Adeo: The Organizational Fees are for setup and have a cap, and there annual Fund Expenses that are not capped right now. I am speaking to the lawyers about a cap.

 -  Pablo Vidal Arean
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Accounting & Taxes

What do we need to put in LPA to help outside-US LPs don't trigger UBTI/UBI (paying US income tax)?

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Community Member
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May 03, 2023

What do we need to put in LPA to help outside-US LPs don't trigger UBTI/UBI (paying US income tax)?

Top answer:

This is driven by investment decisions, not by contractual language. I would not recommend including this unless explicitly asked.

 -  Pablo Vidal Arean
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Accounting & Taxes

What is a Schedule K-1

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Community Member
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May 03, 2023

What is a Schedule K-1

Top answer:

Part of 1065 filing. Partner specific form which details distributive share of all income and expense items incurred by the partnership.

 -  Neal Strickberger
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Accounting & Taxes

What is Qualified Small Business Stock (QSBS) (Section 1202)

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Community Member
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May 03, 2023

What is Qualified Small Business Stock (QSBS) (Section 1202)

Top answer:

A specific US federal tax exemption that allows investors in Qualified Small Business (defined as under $50M capitalization) for some capital gains tax exemption (up to 100%) based on how long the stock is held (minimum 5 years) up to $1...

 -  Neal Strickberger
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Accounting & Taxes

What Are the Best Practices for Accounting Acquired Portfolio Companies via Share Swaps in Your Track Record?

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Community Member
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May 03, 2023

What are the best practices to account for portfolio companies that are acquired through share swaps in your track record?

Top answer:

Compare the price per share between your purchase price and the current price when acquired, and then record this differential as a markup. This assumes that you will have the same number of shares. If the share counts differ, then just ...

 -  Community Member 1 Show more