A closely held business may come to our firm for any number of reasons. The owners may be selling the business, for example, or they may be thinking about spinning off a division. In some cases, the owners are considering the admission of a new investor, or the issuance of equity to a key employee;
The Paycheck Protection Program[i] has been welcomed by many as the cornerstone of the CARES Act.[ii] It was passed by Congress and signed into law by the President shortly after the government-ordered shutdown of businesses and other organizations[iii] throughout the country as part of the effort to contain the spread…
It is said that repetition is the mother of all learning. It is also said that insanity is repeating the same mistake and expecting a different result. It is my hope that the result of the former will overwhelm the source of the latter before it is too late.
However, based upon the seemingly continuous…
Over the last thirty years, I have reviewed the income tax returns of many closely held corporations and partnerships. Quite often, on Schedule L (the balance sheet), I will see an entry for “other assets” or “other liabilities,” which are described on the attached explanatory statement as loans to or from affiliates, as the case may be. I then ask a series of questions: did the board of directors or managers of the entities approve the loan; how was the loan documented; is there a note with repayment terms; is the debt secured; does the loan provide for interest; has interest or principal been paid; has there ever been a default and, if so, has the lender taken action to collect on the loan?
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