The fast-paced and demanding private equity and venture capital industries can provide
There are three areas of liquidity risk that private equity and venture capital partners are
PLANNING FOR UNPREDICTABLE CASH FLOW
A key consideration is forecasting the timing of cash flows and expected compensation by building a baseline financial plan that is not overly dependent on projected future fund distributions and liquidity events. Outside of salary or draw, bonus payments and fund distributions will vary based on the long-term performance of the underlying portfolio companies. It is essential to establish personal financial goals, quantify them and prioritize cash flow given these constraints. Cash flow considerations should include maintaining liquidity for future capital calls and taxes and building a cash reserve for managing unexpected personal expenses.
PLANNING FOR COMPLEX TAXES
Income tax planning must account for all compensation. Partner income may have no tax withholding, requiring quarterly estimated tax payments to avoid penalties and interest. Tax withholding on cash bonus payments
Carried interest may vest over a period of years. Individuals should
Without properly understanding their complete tax picture, partners and executives may
PLANNING FOR LIQUIDITY
Estate planning for private equity and venture capital partners can be complex. Liquidity is just one issue. Because
The rewards for private equity and venture capital partners can be substantial. So too are the risks, especially if
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