Private Equity & Venture Funds
Capital calls, carry, and K-1s — fund finance is its own language.
A fund tracks two ledgers simultaneously: the fund entity and every LP's capital account. Management fees, carried interest, waterfall distributions, and blocker structures each follow their own tax and accounting rules. We build books that speak GP and LP — so your next audit, LP report, or K-1 season isn't a scramble.
Why fund books break standard accounting
Called capital is not revenue. Carry is not salary. The J-curve is not a loss.
A fund layered on a standard chart of accounts produces numbers that mislead LPs, misstate performance, and create tax exposure at year-end.
Capital calls vs. revenue
LP contributions drawn via capital calls are equity receipts, not revenue — yet off-the-shelf bookkeeping software defaults to recording them as income, overstating the fund's apparent earnings and distorting every ratio downstream.
Waterfall & carry allocation
Carried interest is allocated through a waterfall with preferred return, catch-up, and split tiers. Getting the order wrong — or misclassifying carry as ordinary compensation — creates both LP-reporting errors and material tax exposure.
NAV marks and portfolio valuation
GAAP-compliant fair value marks (ASC 820) are required for audited financials. Without a disciplined mark process each quarter, the NAV on LP capital account statements is an opinion with no audit trail.
K-1 complexity at the LP level
Each LP receives an annual K-1 reflecting their share of income, loss, and gain — including Section 1231 gains, UBTI exposure for tax-exempt LPs, and carry recharacterization under IRC §1061. One fund, fourteen different K-1 conversations.
What a fund actually tracks
Ten economic flows — each recognized its own way.
From the first capital call to final distribution, a fund produces economic events that don't fit any standard industry chart of accounts.
The J-curve reality
Early losses are by design. Your books should reflect that — not alarm your LPs.
A fund draws management fees and expenses before exits produce gains. The resulting early negative IRR is the J-curve — expected, not a sign of trouble. Books that commingle fee draws with investment returns flatten the curve and make performance look worse than it is, then better than it is. We structure fund accounts to show the curve honestly, so every LP update reflects what's actually happening.
The fund tax playbook
The difference between carried interest and ordinary income is years — and serious money.
Fund tax isn't just filing a Form 1065. It's entity structure, character of gain, blocker design, and LP-level consequences multiplied across every investor in the fund.
Carried interest holding period
Under IRC §1061, carried interest gains attributable to assets held for three years or fewer are recharacterized as short-term capital gain rather than long-term. Tracking the holding period of each underlying investment — and the character of gain flowing through carry — is required for compliant K-1 reporting.
Blocker corp & UBTI isolation
Tax-exempt LPs (endowments, pension funds) are exposed to Unrelated Business Taxable Income on debt-financed investments. A C-corp blocker entity sits between the fund and those LPs, paying corporate tax and shielding them from UBTI — at the cost of double taxation on that slice of the waterfall.
Section 1231 gains & depreciation recapture
Real estate fund exits produce Section 1231 gains (treated as long-term capital gain net of losses) and Section 1250 ordinary income recapture on prior depreciation. The character split flows through to each LP's K-1 and varies by holding period and cost segregation elections made at the property level.
Management fee vs. profits interest election
GPs sometimes waive management fees in exchange for an enhanced profits interest — converting ordinary fee income into potentially capital-gain carry. The election must be properly documented and the fund's books updated before the year the fee would otherwise have been earned.
Multi-state filing & composite returns
A fund with portfolio companies across multiple states creates state filing obligations for every LP in those states. Composite returns filed by the fund can satisfy most LP state obligations — but the nexus analysis, withholding, and composite election must be made at the fund level, not left to each LP.
QOZ fund structuring & deferral
Qualified Opportunity Zone funds offer gain deferral and potential exclusion on appreciation — but require specific entity form (QOZB or QOF), 90% asset tests reported twice annually, and precise timing of gain reinvestment. Failing a test in any period collapses the tax benefits retroactively.
What we actually run for you
Every service mapped to a fund problem.
The problem
Fund accounting & LP capital accounts
We maintain the fund's general ledger and each LP's capital account — called capital, allocated income/loss, distributions, and ending NAV — audit-ready every quarter, not assembled at year-end.
The problem
Fund tax returns, K-1s & carry reporting
Form 1065 preparation, K-1 packages for every LP, IRC §1061 holding-period analysis, blocker corp returns, and state composites — coordinated so nothing falls through the gap between fund and LP level.
The problem
LP reporting & performance metrics
Quarterly LP reports with NAV, called/deployed capital, DPI, TVPI, net IRR, and MOIC — formatted to institutional LP standards and reconciled to the underlying books every period.
The problem
Cap table & equity management
GP/LP ownership tables, carry pool tracking, follow-on allocation modeling, and audit-ready cap table maintenance — so every distribution waterfall runs off clean data.
Fund admin & audit readiness
Books that survive institutional LP due diligence.
Whether you're closing a new fund, onboarding institutional LPs, or preparing for your first audit, we build the financial infrastructure institutional investors expect.
The numbers we put in front of you
Run the fund on investor metrics, not just a trial balance.
The eight numbers institutional LPs look at first — reconciled to the books every quarter, not reverse-engineered at audit time.
Figures shown are illustrative.
Keep exploring
Go deeper — or just talk to us.
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