DGC and RIW hosted a forum for emerging growth and technology companies on July 25th entitled, “Beyond the Capital Raise: How to Align Your Finances and Operations for Continued Growth.”
Two of our panelists included Don Troy, CPA, CGMA, a Partner at DGC, and John Cohan, Esq., a Partner at RIW. One of the major topics of discussion was entity selection and LLC conversions. What decisions should an early stage company make and what should they do after the capital raise?
“People are attracted to that flow through aspect of an LLC because they want the losses,” Troy said. “They want the ability to at least get some return early on in the investment just because the company is not distributing any cash. In several instances, we have undone that decision.”
Troy discussed an example of how a client’s company started out as an LLC and was later converted to a C-Corporation in 2011.
“There are some huge tax advantages,” Troy said. “For everyone who was an investor in the company who held those shares for five years after that conversion, they will exclude $10 million dollars of gain from tax. They were able to take advantage of that significant tax deduction.”
Our other panelists included Matt Cabrera, CEO at 3D Data Ltd. and Lou Piazza, Director at BATEC-UMass Boston. As business owners who have gone through the process of raising capital, they discussed first-hand examples of how they successfully navigated operational and financial challenges.