Law Commons^™

The Rational Exuberance Of Structuring Venture Capital Startups, Victor Fleischer

ExpressO

This Article takes the bursting of the dot com bubble as an opportunity to reevaluate the tax structure of venture capital startups. By organizing startups as corporations rather than as partnerships, investors and entrepreneurs seem to leave money on the table by failing to fully use tax losses -- especially since the vast majority of startups fail. Conventional wisdom attributes the lack of attention paid to losses to a "gambler's mentality" or optimism bias. I argue here that the use of the corporate form is, in fact, rational, or at least that there is a method to the madness.

I …

Options To Acquire Partnership Interests: Can The Tax Law Keep Pace?, Walter D. Schwidetzky

All Faculty Scholarship

It has become increasingly common for partnerships to issue options that give the holder the right to acquire an interest in the partnership for a set price. The holder of the option will exercise it if he feels that the partnership interest to be acquired is worth more than the exercise price. There is a dearth of authority on the federal tax treatment of option transactions, and the Service has recently asked for guidance from the tax bar as to what approach it should take. This article focuses on one piece of the partnership option puzzle, options to acquire partnership …