It's Tax Day around the country, and April is usually the month where we think about our accountants the most. However, here at ff Venture Capital, we are thinking about taxes and accounting 24/7, especially when it involves our portfolio companies. After all, we have a team of close to 10 people within ffVC who work with our portfolio companies on their accounting and finance needs throughout the year.
I have been with ff Venture Capital almost since its inception in 2008. In that 5-year period, we have completed 143 investments in 60 companies, or one investment every 11.5 days. We have grown our firm from 2 of us in 2008 to 17 now. Our metrics put us in the top quartile in terms of returns as compared to similarly situated funds, and we are attracting exciting new investment opportunities every day.
Accounting. Accruals. GAAP. These words are probably not the first things that pop up in the mind of a startup founder as he or she assembles a team, develops a product, acquires customers and runs a business. As CPAs, though, we believe that these and other related issues a should be treated as critically as any other business decision.
I have written before about the tax benefit to investors from investing in a Qualified Small Business. The fact sometimes gets lost, but a company founder is also eligible for the tax benefit of excluding a portion of his QSB gain when he sells his interest. (State and local tax rates vary.) Because the law places limits on the tax benefit, careful planning by a founder is required.
Taxation of Qualified Small Business Stock: Congress Offers a Large Benefit, if You Can Squeeze into a Small Window
While tax planning should not be the determining factor in making an investment, it certainly should be a factor. That is why, for at least the past 18 months, we have considered the qualifying small business status of a company in which we are looking to invest. Two tax planning ...