New Venture Partners: Top Thirteen Things You Should Know
by Steven Singer, CPA
Olsen & Co., LLP
- Establish due date for estimated capital calls
- Review personal liability insurance
- Review medical insurance issues
- Prepare personal cash flow forecast & balance sheet
- Carried interest: 4 - 6 years away (Don't spend until in your pocket)
- Partnership buy-ins ARE negotiable
- Be aware of quarterly due dates: 1/15, 4/15, 6/15, 9/15, 12/31
- Sock away money for estimated quarterly income taxes
- Have tax person give you % of quarterly draw for taxes
- Currently capital gain treatment may be ordinary in future
- Importance of 83(b) elections
- Review wills and living trusts
- Consider level term life insurance (Irrevocable life insurance trust)
Preventable War Stories
- Purchasing bigger home when making partner.
- Not projecting cash flow needs and having to take out emergency home
equity line for capital calls and estimated taxes.
- Partner passes away three years after making partner, leaves spouse and
kids with no source of income.
- Partner contracts cancer which goes into remission.
- Leaves current firm and is now uninsurable because of pre-condition.
- Partner gets sued by contractor working on home improvement.
- While on business trip tax deadlines are not taken into account.
- Spouse does not know what to do and financial advisor forced to
liquidate funds at an inopportune time.
- Partner passes away, leaves his half of community property to ex-spouse.