Buzz Archive:
U.S. Private Equity Funds Making Cross-Border Investments - Primary Tax Considerations

by Arturo Requenez II and Timothy S. Shuman, 1/3/2008

Tax law, in the U.S. and abroad, may be slow to adapt to changing business practices, but the explosive growth of cross-border private equity investments has spurred interest in changes to various rules, which already are extremely complicated. The place of organization and the choice of entity may have crucial consequences both during the operation of the fund and for its exit strategy.

Private equity and venture funds making cross-border, leveraged buyout investments face certain primary U.S. tax considerations in addition to certain foreign tax issues. The key tax issues that arise during the formation of the fund itself will be explored below, along with the primary tax drivers for the fund sponsors, U.S. taxable investors, and certain foreign and tax-exempt investors. U.S. and foreign alternatives to establishing a fund to make cross-border investments also will be considered.

In one of the most detailed and in depth articles (a 50 page reference treatise) reprinted on VC Experts, we rely on the experience and insight of Arturo Requenez II and Timothy S. Shuman, of McDermott Will & Emery LLP. Kudos to the authors and the firm.