Troubled Waters: Navigating the Tax Issues of LLCs with Bridge Debt
William Skinner, Esq.1
William R. Skinner, Esq. is a tax associate with Fenwick & West LLP, in Mountain View, CA. He practices in the areas of international taxation, corporate/M&A tax, taxation of financial instruments and tax controversy. He has significant experience in international tax planning, tax controversies involving sophisticated international and domestic tax issues, and in the taxation of corporate transactions, such as mergers, acquisitions, financings, debt and equity offerings, and entity formations.
It is an all-too-common occurrence in the venture capital community to extend bridge loans to portfolio companies in order to help them to reach the next round of equity financing or attempt a sale. Often these loans are convertible into equity at the holder’s election or automatically upon the next preferred stock financing that meets a defined set of criteria. Sometimes these loans are secured by the assets of the borrower.