Sydecar leverages the Series LLC structure as it offers flexibility and potential tax benefits for VC investments in privately held companies. Each series in a Series LLC is treated as a separate entity for tax purposes and all series have their assets and liabilities separate from other series and the Parent LLC. This separation of assets and liability for Series LLC is pursuant to Delaware Law. The Series LLC structure allows for pass-through taxation. This means the income, deductions, credits, and other tax attributes of each series pass through to the investors, who report these amounts on their personal tax returns.

Yes, the loss from an investment that has gone to zero will be reflected in your tax package for the year, and you can write it off for tax purposes. In most cases, this will be a capital loss. The deductibility of capital losses depends on your unique tax situation, so we recommend you consult with your tax advisor. Since VC funds pass through tax liability to their investors , each investor must report gains/losses on their annual tax return.

IRS W-8 Forms are a group of tax forms specifically for non-resident aliens and foreign businesses who have either worked in or earned income in the US. It declares the applicant’s status as a non-resident alien or foreign national and informs financial companies that they will be taxed differently than a resident. These forms are only for foreign people and entities without citizenship or residency. A brief description of each form is listed below. Please refer to the instruction forms for specific details about each W-8 form. W-8BEN: Used by individuals to claim foreign status or treaty benefits. Individuals may also use it to claim treaty benefits for royalty/passive income treaty benefits. A U.S. tax identification number is required for exemption from tax withholding. All fields in line 10 must be completed to claim exemption on Royalty payments. Instructions: http://www.irs.gov/pub/irs-pdf/iw8ben.pdf Form: http://www.irs.gov/pub/irs-pdf/fw8ben.pdf W-8BEN-E: Used by foreign entities to claim foreign status, treaty benefits, or to document chapter 4 status. A U.S. tax identification number is required for exemption from tax withholding. Instructions: http://www.irs.gov/pub/irs-pdf/iw8bene.pdf Form: http://www.irs.gov/pub/irspdf/fw8bene.pdf W-8ECI: Used primarily by the payee or beneficial owner indicating that all the income listed on the form is effectively connected with the conduct of a trade or business within the United States. The type of income must be identified on Line 9 of the form to qualify for exemption. If it is not listed we are required to obtain from the entity a different type of W-8 form. A U.S. tax identification number is required for exemption from tax withholding. Instructions: http://www.irs.gov/pub/irs-pdf/iw8eci.pdf Form: http://www.irs.gov/pub/irs-pdf/fw8eci.pdf W-8EXP: Used by the following entities to claim exemption from tax withholding, foreign governments, foreign tax-exempt organization, foreign private foundations, the government of U.S. possession, or foreign central bank of issue.The entity must be claiming exemption under IRS code 115(2), 501(c), 892, 895, or 1443(b). Otherwise, they need to file a W-8BEN or W-8ECI. Instructions: http://www.irs.gov/pub/irs-pdf/iw8exp.pdf Form: http://www.irs.gov/pub/irs-pdf/fw8exp.pdf W-8IMY: Used by an intermediary, a withholding foreign partnership, a withholding foreign trust, or flow-through entity. Copies of appropriate withholding certificates, doc. Documentary evidence and withholding statements must be attached to the W-8IMY. Instructions: http://www.irs.gov/pub/irs-pdf/iw8imy.pdf Form: http://www.irs.gov/pub/irs-pdf/fw8imy.pdf Important note: Sydecar does not have the legal authority to advise which W-8 Form is most appropriate. Please contact your tax advisor with any questions or concerns.

Taxable income and expense may be treated differently than accounting income. In general, for the majority of SPVs, no taxable income or expense should occur during the year. Convertible Note Interest: Under U.S. tax law, the interest that accrues on convertible notes during a period usually must be included in taxable income even when the company does not have an obligation to pay it during the period. Passthrough Income from LLCs and Partnerships: If you invest in a fund that invests using a passthrough operating portfolio company, that operating company may pass-through taxable income without a corresponding cash distribution. This allocation may in turn flow through to your K-1.

Box 13, Code W on Schedule K-1 reports expenses that do not fall into any other category of deductions. For example, Management Fees are an expense charged to the SPV that appear in box 13W and are classified as other miscellaneous itemized deductions subject to the 2% AGI limit. However, as a result of the Tax Cuts and Jobs Act (TCJA) in 2018, investment-related expenses previously deductible are not available as a deduction on your tax return.

An Exempt Reporting Adviser (ERA) is an adviser to "Qualifying VC" funds that registers with FINRA and the SEC using the short-form Form ADV.  A Form ADV is a regulatory disclosure form required for investment advisers who must register with the SEC or who are claiming an exemption from registration with the SEC.  Advisers claiming an exemption from registration with the SEC are known as Exempt Reporting Advisers. They are not required to file the full Form ADV with the SEC and instead submit an abbreviated Form ADV.  Advisers can claim ERA status with the SEC in two ways, either using the Private Fund Adviser Exemption (for managing less than $150M in assets) or the Venture Capital Fund Adviser Exemption (for advising a qualifying venture capital strategy fund). You can learn more about this requirement in the SEC’s “VC Exemption,” Rule 203(l)-1 of the Advisers Act. If you are advising your investors (or LPs) and taking carry, you may need to file a Form ADV. You have 60 days from the date of your first securities offering to do so. Investment advisers must still comply with their local state laws. Generally, all states recognize the same exemptions as the SEC (the Private Fund Adviser Exemption and the Venture Capital Fund Adviser Exemption), but with the typical condition that the investment adviser must file a Form ADV to claim the applicable ERA exemption and give “filing notice” to the state. Consequently, to comply with local state laws, an adviser may need to file a Form ADV as an ERA. This website summarizes the notice filing requirements (i.e. Form ADV filing) for advisers in each state. Common requirements that would require an adviser to file a Form ADV as an ERA include: having a place of business in the state; and having more than 5 or 6 in-state clients. Some states automatically require you to file a Form ADV and give notice if you maintain a place of business in the state.  Review your state’s laws on registration requirements as an ERA and determine if you have met the requirements to file a notice filing through the filing a Form ADV as an ERA. If so, then you have 60 days to make the Form ADV filing. Please see here for more information about the Form ADV and what it includes.

Accredited investor rules are defined by law and apply only to private offerings made under Regulation D or Rule 506(b) of Regulation D. The rules for accredited investor status are set by the SEC, which defines an accredited investor as "any person who comes within any one of the following categories, or who the issuer reasonably believes come within any one of the following categories, at the time of the sale of securities to that person: Individuals with annual income over $200K (individually) or $300K (with spouse or spousal equivalent) in each of the last 2 years and an expectation of the same this year Individuals with net assets over $1 million, excluding the primary residence (unless more is owed on the mortgage than the residence is worth) An institution with over $5 million in assets, such as a venture fund or a trust An entity made up entirely of accredited investors SEC- and state-registered investment advisers Exempt reporting advisers filing with the SEC Individuals with certain professional certifications (Series 7, Series 65, and Series 82 license) "Family Offices” with over $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act Any entity with over $5 million in investments and that was not formed for the specific purpose of investing in the securities offered If an investor has a pre-existing relationship with a deal sponsor, then they are not required to provide verifiable evidence of their accreditation status. Verifiable means that you can show the documentation to a third party, such as an accountant or financial advisor. If you want to invest in startups or venture capital funds, it's important that you know if you're an accredited investor. Accredited investors are a specific type of investor who have been deemed by the SEC to be "qualified" to make these sorts of investments.