This sponsored post is produced in association with Avalara.

An IPO may be one of the most significant events in the life of your business. But graduating to the big leagues means big responsibility. When your company is in its high growth phase, you’re probably not thinking about compliance. You are probably more focused on ramping up the business instead. But as you near a liquidity event, that is when you need to address certain issues that weren’t on the radar before.

Here are six fundamental tax and control considerations CFO’s of any high-growth tech company should contemplate when preparing for an IPO.

1. Sales tax of prior period exposure and ongoing compliance

As you get ready for your IPO, you want to get an idea of your sales tax exposure. Even if you don’t take the time to totally clean it up, you want to at least know how much you owe, so you can be prepared for the auditors and put that money aside.

The first thing to consider is where does your company have nexus? Nexus is a situation where a state can obligate you to pay sales tax for a product sold or service delivered in that state. Generally, nexus is created when you have a physical presence, offices, warehouses, and in some cases, even a sales representative, in that state.

Without a physical presence, you may be able to sidestep sales tax. The problem is, states determine nexus differently. What’s more, digital products sometimes fall under different categories as well, so you want to make sure you’ve got all your basis covered.

2. Planning and structuring for international sales tax

As an online company, one way to expand profits is by selling your physical or digital wares across national borders. But this is where you have to be careful. As you start selling global, you want to keep an eye out for the value added tax, or VAT.

VAT is usually due where goods and services are consumed, even if the seller does not have a local presence. Most countries (with the notable exception of the U.S.) have VAT. However, some countries have more than one type. And even though these VAT regimes have many features in common, different countries vary on how they implement the tax.

As you plan for your IPO, VAT is one thing you don’t want to get wrong. Failing to deal with local VAT obligations can lead to audits, backdated demands, having goods seized, and even fines and interest. Fortunately, products like Avalara AvaTax automate both U.S. tax and VAT calculation, keeping you up-to-date in an ever-changing compliance environment.

Join us for a live webinar on Thursday, September 30 at 10 a.m. Pacific, 1 p.m. Eastern, as three high-power tax consultants from the tax audit firm Armanino share critical info on what you need to know if you’re considering expanding, selling, or launching an IPO.

Register here for free.

3. Valuing and understanding limits on net operating losses

Net operating loss (NOL) is a tax credit you earn if your deductions for the year are greater than your revenues. Generally speaking, you can deduct accumulated NOLs from taxable incomes. But here’s where it gets tricky: once you go public, your NOL may be limited.

Section 382 of the Internal Revenue Code imposes an annual limit on the NOL carryover after an IPO or other change of ownership. In order to estimate the availability of NOLs, you will need to conduct a detailed analysis of changes in capital and ownership structure over a three-year period as well as valuation of the company at different dates.

4. Consider upgrading to a sophisticated cloud-based ERP

Rules and rates for corporate sales tax change constantly. Keeping up with those changes is not for the faint of heart. If you are using an outdated back-office enterprise resource planning (ERP) system or shopping cart technology, you risk being non-compliant. Legacy solutions that aren’t cloud-based are particularly vulnerable to this.

If you want to stay compliant, look for an ecommerce shopping cart software that integrates with your company’s inventory, purchasing, catalog, and fulfillment functions. A cloud-based solution, one that updates automatically, can ensure you have the functionality and the comprehensiveness you need when it comes to managing sales tax.

5. Setting up internal controls and prepping for SOX

Getting IPO ready means putting in place the systems and controls you will need to produce financial information quickly and accurately. Right after you file your F-1 Form with the SEC, and at least three months before going public at a minimum, you want to develop a checklist starting with Sarbanes-Oxely (SOX).

Among other things, SOX requires you to certify that your financial reports are accurate and complete and that you have the proper controls in place to quickly predict shortfalls and ferret out fraud. Setting up internal controls and SOX compliance must be in place well before the IPO process, so make sure you get a head start on this.

6. Reconciling revenue recognition issues

For many private companies, the process of going public requires a fundamental shift in reporting and planning. This brings us to our final item: Revenue, one of the most important measures of your company’s financial health. In your S-1 filing, you’ll need to indicate how and when your company counts sales as revenue.

Sounds straightforward, but it’s not. The Financial Accounting Standards Board (FASB) recently announced a new revenue recognition standard. Even though the first applicable reporting period is in 2017, the time to begin preparing is now, especially if you choose to adjust the results from prior periods and provide the three-year comparison required under retrospective application of the new guidance.

For many high-tech companies, going public means you’ve made it. But staying successful after the IPO means bringing tax and valuation issues to the forefront. Your major accounting systems need to be ready for prime time. Smart CFOs who want to stay on top of their game increasingly look to SaaS technologies as a cost-effective method for meeting the rigorous accounting requirements of a public company.

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