Cap Table Maintenance Streamlines Tax Compliance

AAFCPAs advises clients to maintain their capitalization (cap) table throughout the year to avoid frustration, delays, and a compressed tax filing deadline.

Accurate and up-to-date information: By maintaining the capitalization table throughout the year, businesses can ensure that the information is accurate and up-to-date, reflecting any changes in ownership, equity investments, and other capital transactions that occur during the year. This can prevent errors and discrepancies that may arise if the table is reconstructed at year-end.

Improved decision-making: Accurate and up-to-date capitalization table information can help businesses make informed decisions about financing, investments, and other capital-related matters. This information can also be used to track dilution and other ownership-related metrics, which can inform strategic planning and capital allocation decisions.

Streamlined reporting: By maintaining the capitalization table throughout the year, businesses can streamline their reporting processes and ensure compliance with regulatory and financial reporting requirements. This can reduce the burden on finance and accounting teams, who may otherwise need to dedicate significant time and resources to reconstructing the table at year-end.

Facilitate fundraising: Accurate and up-to-date capitalization table information is often required by investors, lenders, and other stakeholders when businesses are seeking to raise capital. By maintaining the capitalization table throughout the year, businesses can quickly provide this information and demonstrate transparency and accountability to potential investors.

By prioritizing the maintenance of the capitalization table, businesses can enhance their financial management practices and position themselves for long-term success.

In addition, clients are reminded to maintain records of owners’ resident addresses, and to share these with your Tax Advisor. Some states require partnership tax filings for resident partners even if there is no other activity associated with that state.

If you have questions, please contact David J. Gravel, CPA at 774.512.4008,; or your AAFCPAs Partner.

About the Author

Dave is a leader in AAFCPAs’ cannabis practice. He provides tax and consulting solutions to multi-state operators, recreational and medical retailers, cultivators, product manufacturers, and investors. He has extensive experience advising cannabis operators and license applicants on optimal entity structure, maximizing deductions in accordance with IRC Section 280E, and multi-year tax planning to ensure preferred tax results, with a focus on preserving cash and maximizing lender/investor value. He also provides guidance on avoiding pitfalls associated with 280E and state and local tax compliance. He helps clients understand the critical role of cost accounting in the cannabis space, and what is scrutinized by those evaluating your statements. He provides insight on documentation needed and what to expect to support an IRS or other external audit.