Equity Investments in Pass-Through Entities: Investment Structures, Tax Ramifications
Financing of LLCs and LPs by Private Equity, Venture Capital, and Angel Investors
Note: CPE credit is not offered on this program
Recording of a 90-minute premium CLE webinar with Q&A
This CLE webinar 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.
Outline
- Advantages and disadvantages of LLCs and LPs as portfolio companies
- Basis step-up (cash flow benefits and exit value)
- Tax-free leveraged recaps
- Outside basis adjustments
- Qualified Business Income Deduction
- Pre-Tax IRR
- Comparison to Corporations
- Corporate income tax rate
- Qualified Small Business Stock
- Special tax issues
- Considerations of tax-exempt and foreign investors
- Basis step-up
- 743(b) adjustments
- 704(c) basis step-up for growth equity investments
- Avoiding the anti-churning rules
- Profits interests
- Negotiating tax distributions
- 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
- Understanding recent IRS regulations on noncompensatory options and convertible debt
- Negotiating tax distributions for preferred equity investments
- Greater flexibility in establishing rights of minority equity holders
Faculty

Steven M. Cohen
Partner
Morgan, Lewis & Bockius
Chair of the firm’s emerging business and technology practice, Mr. Cohen represents entrepreneurs, private equity... | Read More
Chair of the firm’s emerging business and technology practice, Mr. Cohen represents entrepreneurs, private equity investors, and venture capital funds. He advises clients in such industries as technology, life sciences, chemicals, consumer products, digital health, and fintech. Steve counsels mid-Atlantic region investors and emerging growth companies in a variety of business transaction including equity financing transactions, mergers, and acquisitions (M&A), divestitures, initial public offerings (IPOs), joint ventures, and international strategic partnerships.
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Michael P. Spiro
Partner
Finn Dixon & Herling
Mr. Spiro chairs the firm's Tax group, where his practice focuses on providing federal and state tax... | Read More
Mr. Spiro chairs the firm's Tax group, where his practice focuses on providing federal and state tax advice in connection with domestic and international transactions, including hedge and private equity fund formations, mergers and acquisitions, and debt and equity financings and restructurings.
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Richard S. Zarin
Partner
Morgan Lewis
Mr. Zarin provides counseling on tax matters involving international and domestic transactions, including mergers and... | Read More
Mr. Zarin provides counseling on tax matters involving international and domestic transactions, including mergers and acquisitions, the formation and operation of joint ventures, debt and equity restructurings, and securities offerings. He also represents organizers of and investors in onshore and offshore investment funds and other alternative investment vehicles with a broad range of investment objectives, including private equity, venture capital, and hedge funds.
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