Collecting and sending out distributions is where the SPV shares the wealth that a successful investment has created, making sure that all distributions are pulled together and sent, in the right amounts and to the right people. Distributions from a startup company investment usually come in one of two forms: cash or shares. When such distributions occur–and entrepreneurs and investors alike hope they will occur frequently and in large amounts–the SPV needs to distribute the cash or shares in the correct amounts and to the correct investors. Distributions require SPV Administration expertise and will trigger some Tax and Accounting tasks.
This is a moment of truth for your administrative activities. If you handle this step correctly, that will serve as confirmation that the cap table was correct on day one—and that you adjusted it correctly when pro-rata allocations were exercised and when membership interests were transferred. The cap table is vital in getting distributions correct, to ensure that investors never receive less than they should or receive another investor’s amount instead of their own. Furthermore, distributions will affect the tax returns and, when applicable, they will also impact your entity’s financials.
The industry-leading Assure SPV service provides peace of mind for you and your participating investors. Our Glassboard technology platform and other best practices automate and streamline many processes, save you significant time and money, and largely alleviate the potential for errors and delays.
After you complete your final distribution to shareholders, you are ready to move on the concluding step of your capital-raising SPV: SHUTTING DOWN THE SPV: OFTEN CALLED A WIND-DOWN.