Preparing For Venture Capital
Presented by: Tony Ricciardella, Grant Thornton
July 8, 2003 – FundingPost DC Venture Capital Workshop
D.C.: FundingPost brought together 60 CEOs to learn discuss how entrepreneurs today are “Preparing for Venture Capital” with Tony Ricciardella from Grant Thornton. Topics included:
Corporate Structure
S-Corporation
Advantageous from a tax perspective since profit and losses pass through to the shareholders
Avoids double taxation in the event of a sale of the Company.
Not very flexible when try to raise capital
Limited number of shareholders (75)
Limited to one class of stock
VC’s investment would probably bust the S-Corp election
Limited Liability Corporation
Has the benefits of a partnership and a Corporation. Can make the election (check the box) to be taxed as a C-Corp.
Permits more than one class of stock and more than 75 shareholders.
C-Corporation
Permits more than one class of stock and more than 75 shareholders.
FundingPost is proud to share our workshop presentation from leading service providers such as Grant Thornton as a benefit to the entrepreneurial community.
We are happy to share this presentation with you as a benefit to the entrepreneurial community.
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Raising Venture Capital – What to Expect:
Funding from the venture capitalist may come in the form of debt or equity financing or some combination of both (i.e. debt with warrants).
Need to ensure that all consideration exchanged is properly recorded (for example, in a debt with detachable warrants transaction, the value of the warrants would be recorded as a contribution to equity and a discount to the face amount of the debt).
Beware of beneficial conversion features in convertible equity or debt instruments.
After the investment you will have a new member(s) on the board.
Will probably be required to have an audit performed annually by a reputable accounting firm.
Will likely have an audit committee that will meet periodically throughout the year to discuss accounting and auditing matters.