Correctly Valuing Startups’ Complex Equity Structures
Stock compensation opens up new challenges from a GAAP (ASC 718) perspective
In my work, I encounter complex equity structures across a range of scenarios and companies. But the most common is stock based compensation for start-up companies. Whether you’re an auditor or a CFO, you need to be aware of when and how to value complex equity structures. The penalties for ignorance can be significant, including qualified or adverse audit opinions.
New Accounting for Joint Venture Formations
Joint ventures, as defined in U.S. GAAP and formed after January 1, 2025, must apply a new basis of accounting, as issued by the FASB in Accounting Standards Update (ASU) 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60). Under the new basis of accounting, a joint venture will recognize and initially measure its assets and liabilities at the joint venture’s fair value upon formation.
Family Limited Partnerships: Not Just for the Ultrawealthy Originally published in Trust & Estates
A family limited partnership (FLP) is a highly customizable vehicle for generational wealth transfer. The FLP and its close cousin, the family limited liability company (FLLC), are entities that may be used in trust and estate planning to transfer family wealth efficiently across generations; to protect family assets; and to consolidate assets to achieve economies of scale related to administrative costs.
Powerful Estate Planning Opportunities for Clients With Carried Interest. Originally published in Trust & Estates
Carried interest (carry) refers to the profits interest that a fund's general partners (GPs) receive in addition to their direct interest and management fee. In many funds, the carry is a significant part of the partner’s compensation. With the elevated exemption expected to sunset at the end of 2025, now is an ideal time for estate planning when it comes to your client’s valuable carried interest.
The Employee Retention Credit: What Taxpayers Need to Know
The U.S. government has repeatedly revised the requirements for U.S. taxpayers to claim the Employee Retention Credit (“ERC”), also commonly known as the Employee Retention Tax Credit, since its initial codification into law.
Mitigating Estate Planning Risk: Discount for Lack of Marketability (DLOM)
DLOM is applied to a non-controlling interest in a privately held business to adjust for the fact that it is not readily sellable on the open market. If the value of an ownership interest is reduced due to DLOM, it can significantly impact the amount of estate tax owed.
We May Never See a Better Environment for Transferring Wealth… Here’s Why
It may seem that there will always be time to address estate planning. However, a unique opportunity to maximize the amount of wealth that can be tax-efficiently passed to heirs will expire at the end of 2025. Furthermore, legislation could curb lifetime exemption limits even sooner.
Transferring Business Interests to Optimize Estate Taxes as originally published in Trust & Estates on wealthmanagement.com
Millions of business owners are struggling to write the next chapter of their companies and their legacies. Prudent gift and estate tax planning can be the difference between creating generational wealth and squandering it.
Cecil v. Commissioner (T.C. Memo 2023-24)
The case of the Estate of William A.V. Cecil, Sr., Donor, Deceased v. Commissioner is one of the most important valuation cases certainly since Kress v. United States, but possibly ever.
Taxing the Wealthy: A Brief Overview of Recent State Proposals
As the idea of a wealth tax gains more mainstream attention, it’s important for high net worth individuals to stay informed about the proposals and potential implications. Check out this brief overview of recent state proposals for a wealth tax.
Tax-Free Qualified Disaster Relief Payments to Employees in Connection With COVID-19 Will End May 11, 2023
All expenses being treated as nontaxable under IRC Sec. 139 due to COVID-19 will soon lose that benefit.
Are Real Estate Taxes on Non-rental Investment Properties Subject to the $10,000 SALT Deduction Cap?
Yes, they are fully deductible as an itemized deduction in the year they are paid.
Partnership Schedule K-2 and K-3 Draft 2022 Instructions Add New Domestic Filing Exception
The IRS released draft 2022 partnership instructions that include a new exception to filing and furnishing to partners Schedules K-2 and K-3 for 2022.
Buy-Sell Agreements: Benefits and Best Practices
The benefits of a buy-sell agreement are only as good as its terms, effective execution, and regular updates.
Car Wash Valuation: How to Clean Up
A major factor in the car wash industry has been the increase in private equity activity.