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Equity Investments in Pass-Through Entities: Investment Structures, Tax Ramifications

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
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Conducted on Wednesday, August 18, 2021

Recorded event now available

or call 1-800-926-7926

This CLE course will discuss the principle tax ramifications of equity investments in limited liability companies (LLCs) and limited partnerships (LPs) by private equity, venture capital, and angel investment funds.

Description

Historically, most private fund investment activity has been focused on C corporations. However, given the tax advantages and flexibility afforded LLCs and LPs, private equity counsel must understand the tax issues presented by private investment fund investments in these entities.

Although the tax benefits of pass-through entities can add significant value to an investment, there are also unique tax considerations (and potential pitfalls) that investors must consider. Investors must also understand their rights and obligations and those of managing partners and other investors under the governing documents.

Listen as our authoritative panel of practitioners discusses legal issues in investing in pass-through entities, the advantages and disadvantages of LLCs as portfolio companies, various entity investment structures, and the tax ramifications of equity investments.

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Outline

  1. Advantages and disadvantages of LLCs and LPs as portfolio companies
    1. Basis step-up (cash flow benefits and exit value)
    2. Tax-free leveraged recaps
    3. Outside basis adjustments
    4. Qualified Business Income Deduction
    5. Pre-Tax IRR
    6. Comparison to corporations
      1. Corporate income tax rate
      2. Qualified Small Business Stock
  2. Special tax issues
    1. Considerations of tax-exempt and foreign investors
    2. Basis step-up
      1. 743(b) adjustments
      2. 704(c) basis step-up for growth equity investments
      3. Avoiding the anti-churning rules
    3. Profits interests
    4. Negotiating tax distributions
  3. Greater flexibility in establishing rights of minority equity holders

Benefits

The panel will review these and other noteworthy issues:

  • Considering the pros and cons of investing in pass-through entities
  • Choosing the appropriate investment structure
  • Negotiating tax distributions for preferred equity investments
  • Greater flexibility in establishing rights of minority equity holders

Faculty

Lebowitz, Seth
Seth Lebowitz
Partner
Sadis & Goldberg

Mr. Lebowitz advises clients on the tax-efficient planning and execution of a broad range of transactions, with a...  |  Read More

Morrissey, Brigid
Brigid Morrissey, CPA, MBA, MST
Senior Manager
CohnReznick

Ms. Morrissey serves private equity funds, primarily in the middle market. Throughout her career, she has worked with...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include course handouts.

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