But does it actually make sense to use your IRA? 4. Admin and fees There are a couple of other administrative considerations. First, tracking: investments, especially if you do them on your own, is likely easier in the IRA as the custodian should have good tracking...
But does it actually make sense to use your IRA? 3. A bit more on taxes. Two other small things on taxes. We looked at gains in the last post, but we shouldn’t forget the flip-side of that – losses. Capital losses are “useful” in either case – a loss in an IRA will...
But does it actually make sense to use your IRA? 2. Taxes. The key benefit of investing through an IRA, of course, is that any gains have favorable tax treatments: in a traditional IRA, the gains are tax-free when they happen and you pay ordinary income tax upon...
Why would you want to make angel investments through an IRA rather than just cash? Tax efficiency: gains made in IRAs have favorable tax treatments. Other things to buy: People have plenty of ways to use their cash, for both investments and consumption. Uninvested...
Now, not many people know that, but you can make investments in early-stage companies, including through VentureSouth, using funds that are in retirement accounts. How? Step 1: Have cash in a self-directed IRA at a custodian that allows alternative investments. That...
Hopefully between the prose and the spreadsheet, we have illuminated the cost of the compromise for founders and investors finding this middle ground of a “capping participation.”If not, at least you hopefully come away knowing that VentureSouth would never willingly...
Following from the last post, there was a range of fairly attractive outcomes where the capped participation had an impact: let’s review the results from the grey zone.Grey zone: In the (C) grey zone, we have a moderately good result, but one where the capped...
What does the capped participation preference mean in practice?Time for the promised spreadsheet: this sheet lays out the returns for preferred shareholders in (1) a non-participating preference, (2) a (fully) participating preference, and (3) a capped participation...
Are capped participating preferreds unusual? Well, it is option #3 in the term sheet – people generally go with option 1 or 2! – and is slightly more complicated to explain to founders and syndicate partners – hence these posts. This extra difficulty makes it less...
Before we unleash the spreadsheet, though, let’s cover where the idea of capped participating preferreds comes from.The capped participating preference is not a VentureSouth innovation; it’s not even particularly novel or unusual. In fact, it’s an explicit option in...