User:CheshireKatz/Planning/Charts
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As requested by Prof Broderick:
| Susie Starbucks | $50k | Business Expertise | Guaranty of Bank Loan | Guaranty of Lease Payments |
|---|---|---|---|---|
| Amalgamated | $100k | Antique Coffee Decoratives | Coffee Supplies | Management & Operational Assistance |
| Jeff | Goodwill | Day-to-Day Management | ||
| Income | Distribution | Liquidation | Redemption | Conversion | Voting / Management | |
|---|---|---|---|---|---|---|
| Susie Starbucks | 1 | 2 | 5 | 2 | 5 | 1 (only major decisions) |
| Amalgamated | 3 | 3 | 1 | 5 | ??? | 3 (assurance of supply contracts) |
| Jeff | 5 | 4 | 3 | n/a | ??? | 1 (minor day-to-day) |
I N C O M P L E T E
| Susie Starbucks | For her $50k, PrefEquity Interest → Liquid Pref → 10% Accruing Dividend → Convertible into ComEquity |
For her Guarantys, Warrant → To Purchase ComEquity at current FMV |
For her Expertise, Nothing → Already in her interest |
|---|---|---|---|
| Amalgamated | For their $100k, Bond/Note → 10% Int Distributed Currently → Maturity date in 5yrs → Subordinated to Bank Loan |
For their ($25K) Antiques, PrefEquity Interet | For their Supplies, Sale → Regular Price → Exclusive Supplier Agmt |
| Jeff | For his Labor, Employment K → 3 year term → Salary: 10%↓ Market Avg → Bonus: 2% of Revenue (so long as net loss < $25K) |
For his Goodwill, ComEquity → |
I N C O M P L E T E
| Balance Sheet | |
|---|---|
| Assets | Liabilities |
| CASH → $100K (Amalgamated) → $25K (Bank) → $50K (Susan) OTHER → $25K |
NOTES → $100K (Amalgamated) → $25K (Bank) EQUITY → $50K (Susan) → $25K (Amalgamated) |
| Total = $200K | Total = $200K |
| Capitalization Table | |||||
|---|---|---|---|---|---|
| PrefUnits | ComUnits | Warrants(CU) | ComEquivs | % Interest | |
| Susie Starbucks | 50K | 75K | 125K | 50% | |
| Amalgamated | 25K | 25K | 10% | ||
| Jeff | 100K | 100K | 40% | ||
| 75K | 100K | 75K | 250K | ||
Susie looking for Pass Thru losses, Income, & LTCGs
Amalgamated (Foreign corp)
Jeff Income & LTCGs
...and now TAX CONSEQUENCES!
S A J
(50K Cash) (100K Loan) (0K)
( 25K Prop)
Ba: 50K Ba: 100K Ba: 0K
CA: 75K CA: 100K CA: 0K
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L L C
Bank Loan $25K
Ama Loan $100K
Antique $25K (704(c))
[edit] Latest
| Hatfield | McCoy | |
|---|---|---|
| Contributions | Property of: $7.5m FMV - $6.5m Debt $1m |
250k (Cash) |
| Capital Accounts | $1m (80%) | $250k (20%) |
| Equity | Pref ($1m liquid) Com (60%) |
Pref ($250k) Com (40%) |
| Calc for $2.5m company | $1m + (60% of $1.25m) = $1.75m (70%) | $250k + (40% of $1.25m) = $750k (30%) |
| Calc for $10m company | $1m + (60% of $8.75m) = $6.25m (62.5%) | $250k + (40% of $8.75m) = $3.75m (37.5%) |
"No profit" businesses though they increase in value:
- Landlords paying themselves for services and repairs/renovations
- Pro-sports teams
- Companies developing drugs/medical devices
Equity Interests:
- Capital → Constrained
- Appreciation/Profits → Wide Open
- Voting → Wide Open
LLC preferred structure to avoid restrictions on subchapter S Corps and require $1.1m in adjusted basis on Hatfield’s property to travel with him.
...and now TAXES with Vajtay!
Hatfield:
- US Citizen
- Depreciable real property
- Sole proprietor
- Doesn't like tax complexity
- Dying
McCoy
- US Citizen
- Inheritance
- 100k Joint income
- Young & not sick
| EXHIBIT A | |||||
|---|---|---|---|---|---|
| Property | FMV | Adjusted Basis | RemStr Line Deprec | Debt | Cashflow |
| New Jersey | $3.00m | $2.10m | 10 yrs | $2.00m | $0.15m |
| Connecticut | $1.50m | $1.00m | 25 yrs | $1.00m | $0.18m |
| Vermont | $1.00m | $0.90m | 15 yrs | $0.90m | $0.10m |
| Massachusetts | $2.00m | $2.40m | 29 yrs | $2.60m | $0.09m |
H M
($ Ct Prop) ($0.25m)
($ Ma Prop)
($ Vt Prop)
($ NJ Prop)
Ba: $3.15m Ba: $0.25m
CA: $1.00m CA: $0.25m
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L L C
H Basis 6.40m
-6.50m
+3.25m
------
Adj Bas 3.15m
Hatfield ought to include a term in the agreement that requires his approval on sales of appreciated land and triggers distributions to him to pay the tax hit.
Recourse or non-recourse indebtedness? Individual borrower for business loan, almost certainly recourse debt. If it had been non-recourse, his liability would've been redistributed to
