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Simplified Agreements for Future Equity (SAFEs): Tax and Financial Reporting Issues

A live 110-minute CPE webinar with interactive Q&A

This program is included with the Strafford CPE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
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Thursday, December 5, 2024

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926
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This webinar will explain the tax and accounting implications of simple agreements for future equity (SAFEs) for tax professionals and emerging businesses. Our panel of federal tax reporting professionals will review the advantages and disadvantages of SAFEs compared to other instruments and examine the tax reporting decisions for issuers and investors.

Description

Simply speaking, SAFEs provide a method to secure funding for early-stage companies. SAFEs can provide initial seed money for a startup business before the investment or equity-seeking round. A SAFE allows these initial contributors to acquire equity in the future at a discounted price once the company reaches specific milestones.

The IRS has not issued any guidance on the tax treatment of SAFEs. These future equity agreements are generally treated as prepaid forward contracts or equity, depending on the terms of the agreement. Although SAFEs are simple to establish and provide flexibility, the lack of control of the investment since the investor has no voting rights, potential dilution of the investment as other initial investors join, and uncertain tax implications can all be significant deterrents.

Listen as our panel of emerging growth experts reveals the proper tax and accounting implications of SAFEs. As troubling as the tax implications are, companies must also correctly report and disclose these investments in their financial statements.

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Outline

  1. SAFEs: introduction
  2. Federal tax treatment
    1. Forward contracts
    2. Equity
    3. Other options
    4. Compliance issues
  3. Benefits
  4. Drawbacks
  5. Other investment agreements
    1. Warrants
    2. Convertible debt
    3. Preferred stock
  6. Financial statement reporting and disclosures
  7. Other considerations

Benefits

The panel will cover these and other critical issues:

  • Primary considerations of an investor before entering into a SAFE
  • Properly reporting and disclosing SAFEs on a company's financial statements
  • Examples, including tax reporting of SAFEs as prepaid forward contracts and equity arrangements
  • Alternatives to SAFEs, including convertible debt arrangements

Faculty

Babiak, Ryan
Ryan Babiak, CPA, MST
Partner
Withum Smith + Brown

Mr. Babiak is a tax partner more than 15 years of experience in public accounting. He specializes in accounting for...  |  Read More

Bilbao, Lore
Lore Bilbao, CPA
Tax Manager
Withum

Ms. Bilbao is a Tax Manager at Withum.

 |  Read More
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