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Investing in Special Purpose Vehicles (SPVs) should generally be avoided due to several potential consequences: 1. Tax extension for LPs: If you proceed with an SPV investment, you'll likely need to request that your Limited Partners (L...

Investing in Special Purpose Vehicles (SPVs) should generally be avoided due to several potential consequences: 1. Tax extension for LPs: If you proceed with an SPV investment, you'll likely need to request that your Limited Partners (LPs) file an extension because the K-1s from the SPVs are likely to be delayed. 2. Non-qualified investment: Such investments are considered non-qualified, and they will count towards your 20%, potentially affecting your overall portfolio balance. 3. Creation of a Blocker: To mitigate potential risks of dividends flowing through to your LPs, it may be necessary to create a blocker entity. 4. Poor Reporting from Portfolio Companies (PortCo): Investing through SPVs might result in inferior reporting from the Portfolio Company, which can hinder decision-making and performance evaluation. 5. Limited Leverage during Transactions: Having investments structured via SPVs could result in reduced leverage during M&A transactions or secondaries, potentially impacting negotiation outcomes and overall investment strategy.

VCs don't invest in LLCs. LLCs are pass through vehicles and issue K1s to all members, so all gains and losses are passed through to the fund, and the fund must pass them through to every LP. In addition to the MASSIVE accounting and tax...

VCs don't invest in LLCs. LLCs are pass through vehicles and issue K1s to all members, so all gains and losses are passed through to the fund, and the fund must pass them through to every LP. In addition to the MASSIVE accounting and tax headache, if a company is profitable and they don’t distribute dividends, VCs will need to report taxable income to their LPs.

There are two solutions if you encounter an LP who would like to sign the LPA with a different name/entity than their pipeline prospect entry: 1. You can add their entity (e.g. LLC) to the "Organizations" directory and then add that LLC ...

There are two solutions if you encounter an LP who would like to sign the LPA with a different name/entity than their pipeline prospect entry: 1. You can add their entity (e.g. LLC) to the "Organizations" directory and then add that LLC as a Capital Account (e.g. Closing pipeline) 2. You can add the Individual who signed the PACT as a Capital Account. Either way, the person who receives the email will have an option to modify their data before signing the LPA. If they get an email as an "individual", they will have the option to switch to an entity on the first page of the LP Onboarding questionnaire.