A cap table is a consolidated record of all your stockholders, type of stock they own, and the percentage of your company they own. While that seems pretty straight-forward, it can actually get pretty complicated—don’t worry, though, we’re here to guide you.
A major part of cap table management is tax compliance, and the IRS has a lot to say when it comes to disclosing ownership in your company—especially foreign ownership. As such, best practices dictate that you have whoever facilitated the stock transfers draft this document for you. In fact, if you aren’t sure if you have a cap table prepared it is likely that your legal department or consultant will have this on file.
At the end of the day, we know collecting this information can be time consuming, but if you do it wrong, you could end up paying tax penalties.
Here are a few key components we’ll need:
- The number and types of shares issued as of year-end
- The contact and Tax ID information for Officers, Directors, and Partners
- Your articles of Incorporation, especially if you amended it to increase or decrease the number of shares during this tax year
Here are the most common reasons why we need your cap table:
- For preparing the equity section of the financial statements
- For completing the DE Franchise Reports
- In order to report ownership percentages for any officer's of the company on Form 1125-E
- In order to determine if anyone owns more than 20% of the company's voting stock for Schedule G reporting
- If shareholders are foreign, to determine if any Form 5472 reporting is required ($10,000 penalty for late or missed filing on this form)
- Some state tax returns require more detailed cap table disclosure
- Number of shares by type (Preferred and Common)
- Corporate officers’ identification information
- Identification and ownership information for each partner
Check out an example Cap Table template below, and be sure to reach out to your account manager with any additional questions.
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