3 things venture capital and private equity firms should consider when it comes to tax compliance

You and your limited partners want maximum ROI from your investments, but if your portfolio companies don’t manage tax compliance properly, it can stunt their growth and, eventually, eat into your firm’s returns during exit. Everyday issues such as exemptions, non-taxable sales, and drop shipping make tax compliance risky, error prone, and a surprising drain on resources. According to Wakefield Research, companies on average employ six people to manage tax compliance, and those employees spend 25 percent of their time (upwards of 460 hours per year) solely on sales tax-related activities.

Keep these three tax concerns in mind as you guide your portfolio companies’ growth:

• Rules and regulations change faster than you can say ”Nexus.”
• As the businesses in your portfolio grow, so does their potential tax exposure, these are three areas that consistently trip businesses up.
• Audits are inevitable, but you can help your portfolio companies avoid negative outcomes.