Private Equity Accounting & Business Development

Accountants who specialize in private equity accounting software, tax preparation and CFO advisory

Private Equity Accounting & Business Development

Accountants who specialize in private equity accounting software, tax preparation and CFO advisory

Accounting for Private Equity Funds

Accounting for private equity funds should accommodate privately held companies, keeping in mind that that private equity funds are not traded publicly, and private equity investments are usually made directly from high net-worth sources. Thus, accounting and tax planning follow the same tone.

A private equity CPA should work within the standards issued by the FASB and the IASP. Some accounting standards were not formed with private equity entities in mind, so private equity tax planning and private equity fund accounting must be adjusted to clearly outline the financial situation and operation of the private equity fund.

Private equity bookkeeping, especially the preparation of financial statements, should clearly reflect the terms that the equity fund has with the different businesses or individuals that have invested. The private equity fund’s activities and investors should also be outlined in financial statements.

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Private Equity Accounting Guide

Private equity funds under the US GAAP follow this framework laid out by the American Institute of Certified Public Accountants that includes an Audit and Accounting Guide. According to the guide, private equity bookkeeping should consist of:

  • Cash flow statements
  • Schedule of investments
  • Statement of assets and liabilities
  • Statement of operations
  • Separate listings of financial highlights
  • Notes on the financial statements

Need help making sense of private equity find accounting?

Fusion CPA offers private equity CFO business advisory to small and medium-size private equity funds. As private equity financial advisers, we aim to help you manage client relationships, coordinate quarterly investor reporting, review and prepare management fee calculations, and prepare quarterly management fee calculations.

Our team of experienced accountants is here to provide leadership and guidance. We are well-versed in the principles behind accounting for private equity funds.

How is private equity taxed?

It’s also essential to understand how the government has decided to tax private equity. Doing so should keep you prepared for this financial obligation and ensure you won’t be stressed by wondering, “How is private equity taxed?”

Gathering Investments

One of the main differences between public companies and private equity companies is the way capital is received. Individuals who have the required capital to purchase shares of a public company can do so via one or more of the available brokerages handling stock market transactions. Individuals who want to make a private equity investment must meet more stringent requirements based on their net worth, income, professional experience and ability to make a significantly sizeable initial investment. These people are usually referred to as accredited investors. They have an annual income exceeding 200,000 or $300,000, a high net worth exceeding $1 million and can afford to put their money into more risky investments.

Entity Structure

Private equity funds are likely to be structured as limited partnership agreements. They generally have multiple classes of partners consisting of a founder partner class, general partner class, and a limited partner class. Expenses and funds should then be allocated across different partner classes. It may also be helpful to note that a limited partnership agreement sets the rules for the allocation of expenses and distributions.

As the tax laws evolve, equity fund structures may need to be adjusted to provide the best tax protection for all involved. You may have come to understand that private equity funds can create complicated investment and accounting structures. However, the previously mentioned information only scratches the surface of private equity accounting.

There are additional tax rules and regulations in place that vary based on the jurisdiction, county, or state. These elements may add another layer of complexity to the accounting process. Our private equity accountants here at Fusion CPA recommend partnering with an expert to assist with understanding the full scope of private equity accounting and placing controls to minimize tax risk.

Benefits of Limited Partnership Structuring

Setting up a private equity fund or company is usually done by utilizing a limited partnership structure as doing so provides several benefits. As a limited partner in this type of business entity, you’ll receive asset protection. All assets in the limited partnership are protected if you get sued. Also, as a limited partner, you don’t have to worry about day-to-day operations. The general partner completes this activity, and you’re only liable for the investment you make in the company.

 

Understanding the method used by the government to tax private equity is essential if you want to ensure you’re meeting all expectations and guidelines required by the IRS. Setting up a private equity investment as a limited partnership provides a tax benefit as the partnership pays no taxes on income. Using this flow-through entity allows the limited partners to receive income via dividends or distributions. Another advantage is the carried interest provision. It allows the limited partnership to provide a share of the profits as compensation. It’s considered a return on investment and taxed at the capital gains rate, avoiding the income tax bracket’s higher rates.

The tax obligation for limited partnership is also modest. Losses pass through to the partners and can help offset gains that have been generated from other investments. Knowing how to account for this and ensure it meets the IRS guidelines may be more straightforward to handle when a professional tax accountant is involved in the tax planning and preparation process. Paying management fees using a de facto dividend can also be advantageous as it is classified as a nontaxable business expense.

Knowing more about how the government has decided to tax private equity should provide you with the information needed to see why utilizing a limited partnership can be beneficial.

At Fusion CPA, we have experienced CPAs who work with this type of business structure frequently. Tapping into their knowledge and experience may be what you need to handle your taxes correctly and efficiently. Contact us today if you have any questions. We’d be happy to assist you in building a strategy for your tax obligations.

Taxes for private equity companies can be very complex. We specialize in interstate tax laws and compliance, as well as tax planning, which will further guide you to make informed financial decisions.

With our help you can close a deal without being bogged down by governance issues.

  • Your accounting software is a nightmare to use or non-existent, as you’re using spreadsheets
  • You’re wasting a lot of time reconciling your payment records
  • You are paying too much taxes because you don’t know all the tax laws
  • You seem to be incurring a lot of unexpected business expenses
  • Your business can make more profits, but inefficiencies and issues are holding you back
  • You don’t have clear business goals or a clear path to achieving them

Our Philosophy for Private Equity Accounting and Business Success

Fusion CPA started offering online outsourced accounting back in 2010 and soon realized that there is a need for complete financial transparency, stability and control in accounting for private equity. This can only be achieved with suitable accounting software for private equity companies, so we branched into software solutions. Now, we offer much more than just accounting for private equity companies and similar organizations. We optimize our clients’ finances from the inside out to achieve high-performance on their investments. Accounting is just the first step to success.

To really make a difference and to reach our clients’ goals we use the data we collect during the stabilization of their accounting to determine what the best tax planning strategy will be. From there, clients can implement other measures to optimize their business processes, like making use of our business advisory services. After all, we’ll know your finances best, and we can help you streamline every part of your company, from finance to operations, to sales and marketing, so you can focus on what really matters to you.

Accounting software for private equity groups is no longer just for accounting. At Fusion CPA, neither are we.

You’re also aware that while your book of business becomes more profitable over time, it must continuously grow to ensure your company’s longevity. Trying to manage new and tenured client relationships while shuffling legal documentation is more than anyone can handle alone. Let’s also not forget managing cash flow and leveraging assets. Software for private equity firms like the ones listed below are now paving the way for entrepreneurial equity firms to better manage their company from the closings to compliance and ultimately, capital gain.

Streamline Sales

A sales platform integration creates a sense of accountability and expectation across your sales team. Keep track of pre-planned meetings, document meeting notes and information, and create follow up reminders for specific needs throughout the closing process. With the red flag notifications for upcoming items that are due, your sales team can work with the operations team to make back office work more manageable. It also looks more professional to remember signatures up front! Easily monitor fundraising and set goals and deadlines and retain clients longer with future dated reminders to check in.

Improve Operations

Let’s face it. Sales people are focused on closing deals – not filing paperwork. With the new software for private equity, though, integrating compliance with closing a deal has never been easier. With each step of the process, sales representatives are reminded of what needs to be completed to be in good legal standing – protecting the client and your company. These easy-to-use software companies have taken the guess work out of gathering documentation in a timely fashion and retention. Finally, sales and security work hand in hand to create a sound financial institution.

 

Accounting & Financial Management Software Recommended by Accountants

Often, you’ll be wearing many hats as you fill your pool of investors and coordinate transactions. In the current fast-paced trading environment, you need to remain confident and agile. You can’t afford the time or the attention necessary to manage all of the moving parts.

Private equity CFO advisory can make all the difference. We’re the lynch pin that steadies and directs your business, leaving you free to strategize and react in volatile markets.

The goals, activities, and structure of private equity consulting firms are different than those of individuals or more traditional business models. You need to practice due diligence while making investments work throughout their life cycle. Each and every transaction must be weighed to attract multiple partners and leveraged within the limits and constraints of high finance.

This requires a combination of experience, ideas, and innovation to unlock the potential of companies under your purview and create value for your equity partners.

As such, private equity business development is paramount for the financial viability and health of your enterprise.

Our experience allows us to keep your company in full compliance while adjusting traditional accounting standards and processes to reflect the realities of managing private equity funds.

Our team of CPAs is able to identify and implement the right accounting standard for you while adhering to the frameworks provided under the American Institute of Certified Public Accountants guidelines for private equity investments.

This includes proper asset valuation under each standard with the goal of minimizing risk and leveraging the potential of each investment.

In addition to business development support and advisory services, you’ll experience strategic tax planning and preparation, financial advisory, and bookkeeping services that adhere to the principles of private equity fund accounting. This includes a full statement of assets and liabilities with separate listings of financial bright spots.

 

Our services are guided by industry standards and best practices as well as our keen insight into financial management to help:

  • Billing
  • Payment processing
  • Aged accounts receivable collections
  • Accounts receivable management
  • Ancillary income development

We achieve this through a combination of personalized consultations and planning sessions, current technology, and an attention to detail that’s unparalleled in the accounting profession.

Our knowledge is local, but our reach is global.

Most CPAs only put the numbers in the forms. What I love about these guys is they really understand my business. They work with our team so we understand our financial picture at all times and help us run our business. They are entrepreneurs and they understand entrepreneurs. They take care of my multi-company corp bookkeeping, corp/personal tax prep and strategic growth planning.

Discover Customized Financial Services

Our services can assist your private equity company at every stage of growth to reach its full potential

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