IPO tax readiness: Considerations for executives and private equity sponsors

Evaluating the company’s current entity structure is an important first step. Corporations, partnerships, LLCs taxed as partnerships, and disregarded entities each present different considerations in the IPO context.

Corporations often have a more direct path to public markets, while partnerships and disregarded entities may require additional steps. Early assessment of whether the existing structure meets public company requirements and aligns with long-term objectives helps inform subsequent tax decisions.

Companies taxed as partnerships or disregarded entities should consider whether an Up-C structure and a TRA are appropriate.

An Up-C involves creating a new corporate entity to serve as the public issuer, with current owners maintaining interests in the operating partnership. A TRA facilitates the monetization of certain tax attributes for pre-IPO owners.

These decisions, which require careful evaluation with qualified tax advisors, are best made early in the process to ensure alignment with transaction goals.

Thorough tax diligence is essential, as legacy tax exposures can carry over to the public company and affect financial reporting and investor perceptions. Areas of focus include:

• Federal, state and local income tax positions
• Sales and use tax obligations
• Employment and payroll tax compliance
• nternational tax risks

Proactively identifying and remediating issues supports a smoother transition and helps avoid complications post-IPO.

Public companies face heightened requirements for tax accounting and financial reporting. Establishing a robust, auditable income tax provision process that complies with standards of the Securities and Exchange Commission and Public Companies Accounting Oversight Board is essential.

In addition to selecting a tax provision provider with public company experience and ensuring appropriate separation from the audit firm where necessary, organizations should carefully evaluate and choose tax provision software to implement and maintain these processes.

The right software can streamline calculations, improve accuracy, facilitate documentation, and support ongoing compliance. Investing in a well-suited tax provision platform not only enhances efficiency but also provides scalability as company needs evolve, helping ensure readiness for public company demands.

Strong internal controls over financial reporting, including tax-related processes, are a key component of IPO readiness.

Companies should document repeatable tax processes, clarify ownership and accountability for deliverables, and ensure systems are equipped to handle the complexity of public company compliance. Investing in tax infrastructure in advance supports sustainable compliance and builds investor confidence.

Companies must determine the optimal tax operating model for their needs—whether outsourcing, building an internal team, or adopting a hybrid approach.

Outsourcing can be efficient during the IPO process, while in-house teams offer greater control and institutional knowledge. A hybrid model, combining internal oversight with external support, is often a practical long-term solution. This decision should reflect future goals as well as immediate needs.