That changed this week.

The SEC released interpretive guidance — SEC Interpretive Guidance 33-11412, Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets — that represents the most substantive regulatory clarity the digital assets industry has seen in years. Combined with earlier coordination with the CFTC, this guidance draws meaningful lines around what falls under the SEC’s jurisdiction, what falls under the CFTC’s jurisdiction, and what doesn’t fall under federal securities law at all.

Here’s what you need to know, and what it means for your next move.

The SEC’s Five-Category Framework for Crypto Assets 

The centerpiece of this guidance is a formal classification system that sorts crypto assets into five distinct categories. This matters because your regulatory obligations and your legal exposure hinge on which category applies to your assets. 

1. Digital Commodities  

Assets like Bitcoin, Ether, Solana, and XRP fall here. Their value derives from the programmatic operation of a functional crypto system and market supply and demand, not from any expectation of profits tied to someone else’s managerial efforts. The SEC has been explicit: this category includes a wide range of well-known assets, from Cardano and Chainlink to Dogecoin and Stellar. 

2. Digital Collectibles  

NFTs and meme coins whose value is driven by scarcity and cultural demand — not profit-sharing rights or ongoing managerial activity — fall into this bucket. Examples cited include CryptoPunks and WIF. 

3. Digital Tools  

Crypto assets that serve a practical function within a system — access credentials, tickets, memberships — and are acquired for use rather than investment returns. Ethereum Name Service domain names are one example the SEC cites. 

4. Stablecoins  

This is a nuanced category. Stablecoins may or may not be securities depending on their structure. Notably, payment stablecoins (crypto assets designed to maintain a stable value relative to a reference asset, such as the U.S. dollar), issued under the GENIUS ACT are categorically excluded from securities status.  

The SEC had also previously issued a statement on stablecoins in April 2025, prior to the GENIUS ACT, where they provided guidance on Covered Stablecoins that do not need to register with the SEC. The SEC acknowledges its prior statement is superseded by this latest interpretation, reiterating that Covered Stablecoins do not need to register, and that the primary Federal payment stablecoin regulators will issue final regulations according to the GENIUS Act timeline. Stablecoins not considered to be Covered Stablecoins may meet the definition of a security.

5. Digital Securities  

Tokenized representations of traditional securities like stocks, bonds, and profit-sharing interests recorded on a blockchain. The SEC’s position here is straightforward: a security is a security regardless of format. Being on-chain doesn’t change anything. 

What This Means If You’re Not in the Securities Business 

Two key clarifications stand out: where the lines are drawn, and when those lines may no longer apply.

The Lines Are Clearer — and That’s Good News 

One of the most significant conclusions in the guidance is direct: digital commodities, digital collectibles, and digital tools are not inherently securities. That’s a meaningful green light for developers, issuers, and businesses operating in those spaces.

However, there’s an important nuance you shouldn’t overlook. A non-security crypto asset can still be offered or sold subject to an investment contract — which is a security. So the asset itself may not be a security, but the transaction around it might be. This distinction matters when you’re structuring offerings or fundraising.

Non-security crypto assets do not necessarily always remain associated with the investment contract in a secondary market transaction. If the purchasers in those secondary markets will not reasonably expect typical representations or promises in investment contracts, such as for the issuer to engage in essential managerial efforts from the initial investment contract, then the non-security crypto asset does not remain subject to the associated investment contract and is not itself a security for purposes of the secondary market transaction.

Investment Contracts Don’t Have to Last Forever 

This is one of the most practically significant clarifications in the guidance, and it could directly affect businesses that have been operating under legacy compliance structures.

The SEC has formally acknowledged that a non-security crypto asset that was part of an investment contract as a security does not have to remain subject to that contract indefinitely. Once purchasers no longer reasonably expect the issuer’s managerial efforts to be connected to the asset, the asset separates from the investment contract — and federal securities law no longer applies to the non-security crypto asset.

If your business has assets caught up in this situation, this is the roadmap you’ve been waiting for.

Key Activities the SEC Has Clarified 

Beyond the asset classification framework, the guidance addresses several common activities that have existed in a regulatory gray zone. 

Protocol Mining and Staking 

• Mining: Protocol mining activities, under the circumstances described in the guidance, do not involve the offer and sale of a security. Participants do not need to register with the SEC or qualify for an exemption. 
• Staking: Protocol staking activities receive similar treatment. They are generally not considered securities transactions. Staking Receipt Tokens are also generally not securities — unless the underlying asset is a digital security or a non-security crypto asset subject to an investment contract. 

Wrapped Tokens 

The logic here follows the underlying asset. If a redeemable wrapped token represents a non-security crypto asset not subject to an investment contract, it is not a security. If it wraps a digital security or an asset tied to an investment contract, the wrapper takes on securities status too. 

Airdrops 

Airdrops of non-security crypto assets do not become subject to an investment contract under this guidance. The reasoning: the first prong of the Howey test — which requires an investment of money — is not met. Recipients aren’t providing money, goods, services, or other consideration in exchange for the airdropped asset. 

The Compliance and Tax Implications You Should Be Thinking About 

Clearer regulatory lines are good news, but they also mean the time for a “wait and see” posture on compliance is ending. As this framework settles, businesses operating in digital assets will need to take concrete steps. 

Questions worth asking right now: 

• Do your holdings or offerings fall cleanly into one of the SEC’s five categories, or do you have assets that straddle lines? 
• Have you assessed whether any of your prior token offerings were structured as investment contracts — and whether conditions exist to separate the asset from that contract? 
• How does your staking or mining program hold up against the fact patterns described in the guidance? 
• Are your airdrop structures consistent with the SEC’s characterization? 
• What are the tax implications of reclassification, restructuring, or unwinding an investment contract? 

The classification of a crypto asset has direct downstream effects on your tax treatment, your financial reporting obligations, and your exposure to registration requirements. Businesses that move quickly to analyze their position and document their conclusions will be better positioned than those that wait. 

How BPM Can Help 

BPM’s digital assets practice works with companies across the crypto spectrum — from blockchain startups and token issuers to institutional investors and companies that have integrated digital assets into their balance sheets. Our team brings together tax, advisory, and assurance capabilities under one roof, which means we can help you think through this guidance holistically rather than in silos. 

Whether you need help assessing where your assets fall under the new classification framework, evaluating the tax and reporting implications of restructuring, or building a compliance posture that’s prepared for the regulatory environment taking shape, BPM is ready to work through it with you. 

Regulatory clarity is valuable, but only if you act on it. If you have questions about how SEC Interpretive Guidance 33-11412 applies to your business, or if you want to talk through your digital assets strategy in light of these developments, we’d welcome the conversation. Contact BPM today to connect with our digital assets team. 

When structured thoughtfully, these gatherings do far more than review balance sheets. They bring grandparents, parents, and adult children into the same conversation—creating space for transparency, shared purpose, and lasting trust. Done well, they can transform wealth planning from something that happens to a family into something a family does together.  

Structuring Effective Family Meetings 

Let’s explore how to structure family meetings that engage every generation: from preparing the right environment, to facilitating meaningful dialogue, to how a neutral third-party facilitator can assess challenging family dynamics and turn conversation into productive action. 

Start with Preparation, Not Paperwork 

The success of a family meeting is often decided long before anyone sits down at the table. Preparation matters—and it goes well beyond sending out an agenda. The first decision families need to make is whether to bring in a neutral facilitator. A skilled third party takes the pressure off any one family member to run the meeting, manage conflict, or keep things on track. That freedom allows everyone to participate fully, rather than worrying about logistics or family politics.  

Before the meeting itself, a facilitator can hold one-on-one conversations with each participant. These pre-meeting check-ins surface concerns, hopes, and priorities that might not come up naturally in a group setting. They also reassure family members that the meeting is about building something together. When participants arrive knowing that their perspective already shapes the agenda, they engage more openly and more honestly. 

Attendance decisions also deserve careful thought. Excluding spouses or in-laws from every part of the meeting can breed resentment or mistrust, even unintentionally. Many families find it useful to structure the gathering in two segments:  

• A session that includes extended family for broader conversations about values or legacy 
• A session reserved for immediate family to address more sensitive financial matters.  

Whatever structure you choose, communicate it clearly in advance so no one feels blindsided. 

Create the Right Conditions for Honest Conversation 

The physical and emotional environment of a family meeting shapes what people are willing to say. Choosing a neutral location—not the family business office, and not anyone’s home—levels the playing field and signals that the meeting belongs to everyone equally. For a first gathering, a half-day session strikes the right balance: long enough to cover meaningful ground, short enough to keep energy and focus intact. 

Within the meeting, the facilitator’s role is to make sure every voice gets heard. Younger family members, in particular, may hesitate to share opinions in the presence of older generations. Building in structured participation, where each person speaks in turn rather than waiting for an opening, helps draw out perspectives that might otherwise stay quiet. This is how families begin to build the habits of listening and mutual respect that sustain a legacy over time. 

Interactive tools can make these conversations feel less formal and more engaging. For example:  

• Values card exercises, where family members identify and share the principles most important to them, often reveal surprising areas of common ground. 
• Family mission statement exercises, where family members draft a shared statement of purpose together, give everyone a stake in the outcome and create a reference point for future decisions. 

These activities work because they make abstract conversations about legacy and purpose feel tangible and personal. 

Focus the Substance on What Matters Most 

The most productive family meetings move between values and logistics. Big-picture conversations about what wealth is for, what the family wants to accomplish philanthropically, and how different generations define financial responsibility set the tone. These discussions create alignment before anyone gets into the specifics of estate plans, tax strategies, or investment structures. 

When the conversation does turn to financial planning specifics, advisors play an important educational role. The financial literacy of younger family members should be carefully considered; take time to include them in sensitive financial discussions. Explaining concepts clearly builds their confidence and their capacity to participate meaningfully in future planning decisions. Families that invest in this kind of financial education across generations tend to see stronger continuity when wealth eventually transfers. 

Philanthropy often emerges as one of the most unifying topics in a multigenerational meeting. Conversations about giving frequently center on: 

• Which causes matter most to the family 
• How to involve the next generation in charitable decisions 
• What kind of legacy the family wants to leave in its community 

These discussions tend to bring out shared values in ways that purely financial conversations sometimes do not. Many families find that starting with a philanthropic vision makes it easier to build consensus around more complex topics later. 

Turn Conversation into Commitment 

A family meeting without follow-through is just a family dinner with a formal agenda. The final portion of every gathering should focus on converting discussion into clear, assigned next steps. Naming name and setting timelines builds accountability and keeps momentum alive, so ask questions like:  

• Who will draft the family mission statement?  
• Who takes the lead on researching a donor-advised fund?  
• Which family member will coordinate with legal counsel on an updated estate plan? 

Scheduling the next meeting before the current one ends is one of the simplest and most effective things a family can do. It signals that this isn’t a one-time event—it’s a practice. Between meetings, brief check-ins, whether a 30-minute call or a shared progress document, keep families engaged without requiring another major gathering. Over time, these rhythms become part of how the family operates.  

Consider holding a family retreat led by a neutral third party. Families that commit to such regular meetings—even once or twice a year—tend to navigate wealth transitions more smoothly. They’ve already done the work of establishing trust, clarifying expectations, and giving each generation a voice. When difficult decisions arise, as they inevitably do, they have a foundation to build on rather than starting from scratch. 

How BPM Can Help 

At BPM, we work alongside families at every stage of the wealth planning process—from facilitating first conversations to developing comprehensive multigenerational strategies. We understand that structuring these meetings takes advisors who know how to listen, how to navigate family dynamics, and how to translate shared values into sound financial plans. Our team brings the perspective and dedication to make these conversations productive and to help your family turn good intentions into lasting outcomes with our family office services. 

If your family is ready to start—or ready to do it better—we’re here to help. To learn how we can support your family’s wealth planning journey, contact us.  

Regulatory Challenges for Fintech Companies and Key Strategies to Overcome Them 

However, fintech regulatory challenges don’t have to slow your growth. You can turn compliance into a competitive advantage by implementing the right strategies. This article explores the most pressing regulatory challenges fintechs encounter today and provides actionable strategies to navigate each one successfully.  

Challenge 1: Managing Complex Bank-Fintech Partnership Requirements 

Regulators now scrutinize banking-as-a-service (BaaS) relationships more closely than ever. They hold sponsor banks accountable for their fintech partners’ actions. This shift puts pressure on both parties to demonstrate clear accountability and robust oversight. 

Many fintechs struggle with unclear divisions of compliance responsibilities. When contracts don’t clearly define who handles what, gaps emerge. These gaps create compliance risks that can jeopardize the entire partnership. 

Strategy: Establish Clear Accountability from Day One 

Start by conducting thorough due diligence on potential banking partners. Review their compliance history, risk management practices, and track record with fintech relationships. Don’t rush this process. 

Next, negotiate detailed contracts that explicitly outline compliance responsibilities. Your agreements should specify who handles customer identity verification, transaction monitoring, regulatory reporting, and incident response. Leave no room for ambiguity. 

Build regular communication channels with your sponsor bank. Schedule monthly compliance reviews to discuss emerging risks, regulatory changes, and operational concerns. This ongoing dialogue prevents misunderstandings and strengthens your partnership. 

Finally, prepare contingency plans for potential relationship disruptions. Know how you’ll maintain business continuity if a banking partnership ends unexpectedly. This preparation protects your customers and your business. 

Challenge 2: Keeping Pace with Evolving State Privacy Regulations 

Twenty states now have comprehensive consumer data privacy laws. Each state’s requirements differ slightly, creating a patchwork of regulations that fintechs must navigate. You can’t simply apply a one-size-fits-all approach. 

Traditional compliance methods can’t keep up with this rapid regulatory expansion. Manual processes become overwhelming as your customer base spreads across multiple states. 

Strategy: Build Flexible, Scalable Privacy Infrastructure 

Design your systems with modularity in mind. Your platform should allow you to enable or disable specific privacy features based on geographic requirements. This flexibility lets you adapt quickly as new state laws take effect. 

Implement automated consent management tools that adjust based on user location. These systems track user preferences, manage data subject access requests, and maintain audit trails without manual intervention. 

Create a centralized privacy policy framework that you can customize for different jurisdictions. Document how you collect, use, store, and protect customer data. Update this documentation whenever you launch new features or enter new markets. 

Assign someone to monitor state legislative developments. Many states are drafting or considering new privacy laws. Early awareness gives you time to prepare rather than scramble when new requirements take effect. 

Challenge 3: Demonstrating Robust AML and KYC Controls 

Anti-money laundering and know-your-customer requirements remain non-negotiable. Regulators expect real-time transaction monitoring, thorough identity verification, and comprehensive record-keeping. The bar continues to rise. 

Fintechs serving underbanked populations or offering innovative products face additional complexity. Standard identity verification methods may not work for all customer segments. You need solutions that balance accessibility with security. 

Strategy: Integrate Compliance into Your Technology Stack 

Embed AML and KYC controls directly into your platform architecture. Don’t treat compliance as a separate system you bolt on later. Build it into your customer onboarding flows, transaction processing, and account management from the start. 

Deploy automated transaction monitoring that flags suspicious patterns in real time. Configure your systems to detect unusual transaction volumes, rapid movement of funds, or activity inconsistent with customer profiles. Speed matters in fraud prevention. 

Leverage identity verification technologies that accommodate diverse customer populations. Biometric verification, document scanning, and database cross-referencing can help you verify identities while serving customers who lack traditional documentation. 

Maintain detailed audit trails for every transaction and customer interaction. Your records should show who accessed what information, when they accessed it, and what actions they took. These trails prove invaluable during regulatory examinations. 

Challenge 4: Scaling Compliance as Your Business Grows 

Rapid growth creates compliance strain. What worked when you had 10,000 customers won’t work at 100,000 or 1 million. Manual processes break down. Small teams become overwhelmed. Compliance gaps emerge during periods of rapid expansion. 

You need compliance functions that scale with your business without requiring proportional increases in headcount or resources. 

Strategy: Adopt Technology-Enabled Compliance Operations 

Invest in RegTech platforms that automate repetitive compliance tasks. These tools handle transaction screening, regulatory reporting, risk scoring, and policy enforcement with minimal manual intervention. They free your team to focus on strategic compliance issues. 

Implement compliance dashboards that provide real-time visibility into your risk profile. Track key metrics like failed identity verifications, flagged transactions, policy violations, and audit findings. This visibility helps you spot problems before they escalate. 

Develop standardized compliance training programs that you can deliver at scale. Every employee should understand their compliance responsibilities. Use online learning platforms to ensure consistent training across your growing organization. 

Consider engaging compliance advisors who understand fintech-specific challenges. They bring fresh perspectives, help you anticipate regulatory changes, and provide guidance on complex compliance questions. This outside perspective strengthens your internal capabilities. 

Work with BPM for Strategic Fintech Compliance Support 

Navigating regulatory challenges requires more than good intentions. You need deep knowledge of the fintech industry, regulations, practical experience with bank partnerships, and strategic thinking about compliance infrastructure. BPM brings all three to the table. 

Our team helps fintech companies in the financial services space build compliance frameworks that support growth rather than hinder it. We understand the unique pressures you face and provide tailored solutions that fit your business model, technology stack, and risk profile. From structuring bank partnerships to implementing scalable compliance operations, we help you turn regulatory requirements into competitive advantages.  

To discuss how we can help you navigate regulatory challenges with confidence and maintain the trust that drives fintech success, contact us.  

A corporate carve-out offers a specific path forward when traditional restructuring doesn’t quite fit your needs. This article will explain what carve-outs are, how they create value, and when they might be the right choice for your organization. 

Understanding the Basics of Corporate Carve-Outs 

A corporate carve-out occurs when your company sells a portion or a subsidiary. The result is a new standalone entity with its own financial statements and corporate strategy. However, you typically maintain a majority stake in this newly independent company. 

This structure sets carve-outs apart from other transaction types. You’re not completely severing ties with the business unit. Instead, you’re giving it independence while keeping significant ownership and influence. 

How Carve-Outs Generate Value for Your Business 

The logic behind carve-outs often reverses the typical acquisition rationale. While mergers assume two companies create more value together, carve-outs suggest that separation can unlock greater worth for both entities. 

Your carved-out subsidiary gains several advantages through independence. It can forge strategic partnerships with companies that previously viewed your parent organization as a competitor. It can secure financing independently, potentially at more favorable terms given the current funding environment for smaller companies. It can also access new suppliers and customers without the commercial conflicts of interest that may have existed before. 

The parent company benefits too. You can sharpen your strategic focus on core operations. You generate capital through the share sale. You may see your stock price rise as the market recognizes the distinct value of each entity. 

When Should You Consider a Carve-Out? 

A carve-out makes sense when you have a division that would thrive with more strategic independence. This situation arises across nearly every industry. You might have entered a market segment that initially added value but now pulls your organization in conflicting directions. 

Consider a scenario where your premium retail division and discount operation sell similar products. Their business models contradict each other. A carve-out allows each to pursue its strategy without compromise. 

Carve-outs also serve as solutions when divisions underperform or when you need capital from an eventual full divestiture. While executives rarely cite these reasons publicly, they’re legitimate strategic considerations. 

The Carve-Out Process: What to Expect 

Corporate carve-outs rank among the most complex M&A transactions you’ll undertake. The process typically takes eight to 24 months, and success requires careful planning across multiple phases. 

Start by establishing clear motives for the carve-out. What strategic goal are you trying to achieve? Is a carve-out truly the best solution, or would organizational changes suffice? 

Next, define the exact scope. Are you carving out an entire division or just a subdivision? Assess how the carve-out will affect your parent company long-term and what impact it will have on stakeholders. 

You’ll need a strong project management team that includes M&A professionals, functional leaders from HR and finance, and external advisors as necessary. Document every task, assign clear ownership, and track progress in a centralized location. 

Maximizing Value Throughout the Transaction 

The companies that generate the most value from carve-outs follow specific practices. Set concrete goals for both the parent company and the new subsidiary, with milestones for the first three years post-transaction. This prevents either entity from losing strategic focus during the transition. 

Create a comprehensive checklist of resources the carved-out entity will need. If it’s been using your factory floor or IT infrastructure, it will need its own. Form interdepartmental teams that understand where the two companies overlap and can ensure minimal disruption during separation. 

Communication matters enormously. Share your roadmap transparently with internal teams and external stakeholders. Solicit feedback early and often, particularly regarding concerns about the transition. 

Working With BPM on Your Corporate Carve-Out Strategy 

Corporate carve-outs demand sophisticated financial planning, tax strategy, and operational insight. At BPM, we guide companies through these complex transactions, helping you evaluate whether a carve-out aligns with your strategic objectives and ensuring you maximize value throughout the process. 

Our team works alongside yours to navigate the financial, regulatory, and operational challenges that carve-outs present. We help you quantify potential synergies, structure the transaction efficiently, and maintain focus on long-term success for both entities. Ready to explore whether a carve-out is right for your business? To discuss your strategic options, contact us.  

Without a proper valuation, you’re likely to pay tax on the full amount of your original deferred gain, even if your investment is now worth substantially less. 

Important update: This article addresses investments made before December 31, 2026 under the original Tax Cuts and Jobs Act rules. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, changed the deferral timeline for investments made after December 31, 2026, creating a rolling 5-year deferral period instead of the fixed 2026 deadline. However, the 2026 recognition event remains mandatory for all investors who deferred gains under the original program. 

Understanding the Gain Deferral Expiration 

When you invested capital gains into a Qualified Opportunity Fund (QOF), you deferred paying tax on those gains until December 31, 2026. On that date, you’ll recognize the lesser of your original deferred gain or the fair market value of your QOF investment. 

The Tax Calculation 

Here’s how the IRS will determine what you owe: 

• If your investment has appreciated, you’ll pay tax on the original deferred gain (minus any applicable basis step-up) 
• If it has declined in value, you’ll only pay tax on the current fair market value 
• The tax payment is due April 15, 2027, when you file your 2026 tax return 
• You’ll pay tax at the applicable capital gains rate, regardless of whether your investment provides liquidity 

Don’t Forget Your Basis Step-Up: If you held your QOF investment for at least 5 years before December 31, 2026, you receive a 10% basis step-up under Section 1400Z-2(b)(2), reducing your taxable gain to 90% of the original deferred amount. If you held it for at least 7 years, you receive an additional 5% step-up (total 15%), reducing your taxable gain to 85% of the original deferred amount. 

The difference between original gain and current value could save substantial tax dollars, but only if you can document the lower value with a credible valuation. 

Why Opportunity Zone Valuation Matters 

Many Qualified Opportunity Zone investments are illiquid, whether they’re real estate developments still under construction or operating businesses in growth mode with limited cash flow. These situations create “phantom income”: you owe tax on a gain without cash to pay it. 

Two Key Benefits of Proper Opportunity Zone Valuation 

A credible valuation accomplishes two critical objectives: 

• Defensible Fair Market Value Support:  
  • Tax Reduction: In the event property value has declined lower than your original deferred gain  
  • Tax Planning (Step-Up Basis): In the event property value has improved above your original deferred gain and potential tax implications – these are correlated to hold term of asset and amount of property value increase 

• IRS documentation: Provides support that withstands scrutiny if your return is examined 

Without this documentation, you risk paying more tax than necessary or facing challenges during an IRS examination. 

Accepted Valuation Methodologies 

The IRS expects valuations to follow accepted approaches: 

• Real estate-based QOFs: Appraisals using income, sales comparison (market) and/ or cost approaches – must adhere to USPAP standards  
• Operating businesses: Discounted cash flow models or comparable company analyses 

Engaging qualified valuation professionals who understand these methodologies and Opportunity Zone regulations is critical to meeting IRS standards. 

The Liquidity Challenge 

The 2026 recognition event creates a cash flow issue. You’ll owe tax in April 2027 whether or not the fund has distributed cash to you. 

Options to Address Liquidity Needs 

Several strategies can help you prepare for the April 2027 tax payment: 

• Refinancing property within the fund to generate distributions 
• Arranging secondary sales of fund interests 
• Coordinating with other investors to request distributions 
• Tax loss harvesting strategies in 2026 to offset the recognized gain 

None of these solutions happen quickly, making early planning with your tax and financial advisors important. 

What Fund Managers Should Be Doing 

If you invested through a Qualified Opportunity Fund, the fund manager should be coordinating valuation efforts for all investors. 

Benefits of Coordinated Valuations 

Fund-level coordination offers significant advantages for all investors: 

• More cost-effective than individual appraisals 
• Promote consistency in methodology across the investor base 
• Streamline the compliance process 

If you haven’t heard from your fund manager about valuation planning, ask about their process.  

Planning Timeline 

Preparing for the 2026 deadline requires a coordinated effort between investors, fund managers, and valuation professionals. Planning work for the 2026 deadline needs to begin well before year-end. Starting the conversation now positions you to have completed valuations by the third quarter, giving you time to plan for the tax payment. Waiting until the fourth quarter compresses the timeline and increases the risk of rushed work. 

Getting the Right Support 

The 2026 gain recognition event is mandatory for every Qualified Opportunity Zone investor who deferred gains under the original program. Having a partner who can not only perform the valuation but also guide you through the tax implications is essential to navigating this process efficiently. 

Let BPM Help You Navigate the 2026 Deadline 

BPM provides comprehensive business valuation services for Qualified Opportunity Zone investments, working closely with our tax and real estate teams to deliver the documentation you need for IRS compliance. Our integrated approach means you work with professionals who understand both the technical valuation methodologies and the tax planning strategies required for the 2026 recognition event. 

While the 2026 deadline applies to legacy TCJA investments, valuation remains critical under the new OBBBA rules for determining fair market value at key milestones: the 5-year anniversary when deferred gains are recognized, and the 10-year and 30-year marks for measuring tax-free appreciation. Contact us today to discuss your Qualified Opportunity Zone investments and begin the valuation process. 

At BPM, we explore key factors for selecting a business valuation expert and red flags to avoid. By understanding these key factors, you’ll be better equipped to make an informed decision and further ensure that your business valuation serves its intended purpose effectively.

Why Choosing the Right Business Valuation Expert Matters

Accurate and defensible valuations are more important than ever in today’s business climate. It can affect everything from your company’s financial standing to its strategic decisions and legal positions.

Key Business Contexts

Accurate, supportable business valuations are essential in various business contexts, including:

• Stock compensation reporting under ASC 718.
• Tax compliance and penalty avoidance.
• Streamlining the financial audit review process.
• Minimizing hurdles in critical liquidity scenarios.

Factors Increasing Valuation Importance

The more successful your company is, the more critical a defensible business valuation becomes. The importance only becomes more highly levered if other key factors are in play. These include:

• Critical estate planning or reporting.
• Potential disputes over fairness.
• Analysis of pending transactions.
• Potential emergence towards public registration of shares (e.g., IPO or SPAC).

In other words, it is vitally important to get it right.

Role of a Business Valuation Expert

Understanding the role of a business valuation expert is crucial when selecting one. These professionals play a vital part in determining your company’s worth. They bring specialized knowledge and skills to the valuation process. Let’s explore the key aspects of their role:

What Does a Business Valuation Expert Do?

A business valuation expert develops a conclusion regarding the following:

• Economic value of a company.
• Business unit.
• Elements of the capital stack of the subject company.

Valuation Contexts

Valuations may be used in the context of:

• Financial reporting
• Tax reporting
• Stock sales
• Mergers and acquisitions
• Business planning
• Litigation/arbitration
• Other situations

Valuation Process

The business valuation expert generally assesses business value by doing the following:

• Carefully analyzing historical and prospective financial statements, historical or prospective transactions, available reference data, market trends and economic conditions, among other key factors.
• Adjusting for unusual events or circumstances that might distort the business’s true, or normalized, level of performance.
• Presenting findings and outlining the methodologies used. Explaining the rationale behind the key details, processes and findings supporting the valuation in a report. This includes a logical chain of support down to the underlying facts and circumstances in play as of the Valuation Date.

Selecting the Right Business Valuation Expert

Selecting the right business valuation expert is a critical decision. It can significantly impact the outcome of the following — and more:

• Financial negotiations
• Capital transactions
• Tax outcomes
• Legal disputes
• Strategic planning

The process is often complex, involving multiple variables, potential methodologies and standard practices. It combines both art and science, considering a variety of key nuances to develop a logical and defensible work product.

Why Is Choosing the Right Business Valuation Expert Important?

A quality business valuation expert will provide an accurate, unbiased and defensible estimate that clearly conveys your company’s value. But the right business valuation expert does much more than provide a number.

In the event of a legal dispute, for example, they can provide expert testimony. They can assist attorneys in identifying relevant factors to consider, which:

• Impact the concluded value.
• Analyze opposing valuations.
• Assess the fairness of a transaction.

It is essential to select a provider that:

• Has relevant experience, education and credentials.
• Possesses business and financial acumen to understand the purpose of the valuation.
• Understands and comprehends all the factors that can affect value.
• Appropriately selects the relevant approaches and incorporates assumptions that are reasonable and supportable.

The business valuation expert’s reputation, as well as that of the firm, is also important. It adds a layer of assurance that the valuation is both reasonable and defensible. This:

• Increases stakeholder confidence.
• Lends weight to the expert’s opinion in legal proceedings, negotiations and settlements.
• Decreases the likelihood of challenges to the valuation’s validity.

It is critically important to select a service provider who has the credentials and credibility required to help:

• Avoid potential hazards in the future when another shareholder reviews the analysis for reasonableness.
• Avoid potential litigation.
• Ensure supportability upon IRS review.

Hidden Costs of Choosing a Valuation Expert Based on Price

Selecting a business valuation expert on the basis of cost may be tempting. This is especially the case for startups with tight budgets, or businesses in some level of distress. Unfortunately, this often turns out to be a regrettable decision when analyzed over the long term. Such companies mature or face more critical ramifications related to reported values.

Low-end providers often keep their prices down by cutting corners and not performing adequate due diligence. The resulting analyses tend to lack the necessary rigor and thoughtfulness required to sufficiently support the value estimate. This can lead to:

• Audit challenges.
• Additional professional fees.
• Potential tax penalties.
• Delays in completing audits in a timely fashion.
• Review failures.

Focusing on upfront costs is likely to create unseen, and often material, risks or future costs. These may greatly outweigh the short-term benefit. This is applicable whether the valuation is for financial reporting, tax compliance, transaction analysis or dispute support.

Red Flags When Choosing a Business Valuation Expert

The following are common red flags that might prevent a valuation report from holding up to scrutiny:

One or More Individual Valuation Experts Don’t Sign the Reports

Prevailing valuation standards require one or more certified professionals to take ownership of a given report. However, some companies providing valuation reports lack qualified experts. They may have moved away from having individuals sign off on their reports.

Unclear Project Leadership and Lack of Communication

There is a good chance you will not receive a properly completed, defensible valuation upon issuance if:

• Your communication with a firm providing your valuation is through a relationship manager for a subscription product.
• You are unable to get one or more clearly experienced valuation experts on calls in a timely manner.

Insufficient Qualifications

The absence of formal certifications may indicate:

• Lack of formal training.
• Limited knowledge of standards.
• Low reputation recognition by professional valuation bodies, CPA firms, law firms or peers.

This could impact the provider’s ability to deliver accurate, defensible, professionally accepted valuation services.

Inexperienced Valuation Staff

Low-end providers often save money by leaving valuation work to junior employees. Quality valuation work, however, calls for significant judgment and expertise, which can often only come from experienced practice. A lack of experience can lead to poor judgment calls, oversights or errors.

Overreliance on Outdated Data

Historical transactions are very helpful in completing certain valuation analyses. However, overreliance on transactions from beyond 12 months prior to the Valuation Date may be a red flag. It can alert you that the requisite updated diligence was not completed in the developing analysis in question.

Incomplete Financial Picture

A report may be deficient if it does not include comprehensive financial information. This includes:

• A company’s historical balance sheets, and profit and loss statements.
• Inconsistent or unsupportable assumptions. For example, using inconsistent assumed exit terms throughout a single report.

Key Qualities to Look for in a Business Valuation Expert

You need someone who meets the technical requirements of the job. They should also align with your needs for communication, support and professionalism.

The Right Qualifications

Professional certifications indicate a high level of expertise, adherence to industry standards and best practices and commitment to ongoing professional education. This helps ensure that valuations are accurate, reliable and credible in various professional, legal and financial contexts. The following are several recognized certifications worth noting:

• Accredited Senior Appraiser (ASA) from the American Society of Appraisers (ASA).
• Certified Valuation Analysts (CVA) from the National Association of Certified Valuators and Analysts® (NACVA®).
• Accredited in Business Valuation (ABV) from the American Institute of CPAs (AICPA).
• Certified Business Appraiser (CBA) from the National Association of Certified Valuators and Analysts® (NACVA®).
• Certified Financial Analyst (CFA) from the CFA Institute.

Experience

A business valuation expert with both breadth and depth of experience is likely to have encountered and resolved a variety of valuation challenges. They will be more likely to understand the critical nuance of the valuation process at hand.

Willingness to Support and Defend Analyses

Confirm that your expert is willing and prepared to stand behind their valuation. This includes situations such as financial audits, IRS reviews, negotiations, mediations or court proceedings. They should be able to defend their work against scrutiny and cross-examination. Unwillingness to do so is a red flag.

Qualified Expert Sign-Off

This sign-off serves as an assurance of the report’s accuracy and the integrity of the valuation process. Failure to have individual qualified expert(s) sign off on your report can jeopardize third-party acceptance. This may also reflect poorly on the valuation’s credibility in any review setting.

Comprehensive Financial Analysis

Your expert should present the full financial picture of a company. It should consider all relevant factors that could affect its value. This includes analyzing financial statements, market conditions, industry trends and specific business risks.

Be wary of experts who rely on insufficient or unsupportable assumptions or over-rely on dated transactions. This can undermine the valuation’s credibility.

Availability

Business valuation is important, can be complex, and always involves nuance. Your business valuation expert should be willing to take your calls in a timely manner, talk you through the process and answer your questions. This is even more important when a third party scrutinizes a report, such as in a financial audit.

BPM’s Business Valuation Experts

With so much at stake, it’s essential to choose a business valuation expert who not only has the right qualifications and experience but also aligns with your specific needs and goals. With extensive industry experience and multiple professional certifications, BPM’s business valuation services provide a tailored approach that works best for you.

Our specialists provide:

• Extensive experience: Certified Valuation and Appraisal professionals at BPM have been providing services to companies of all sizes for decades. Our practice leaders have over 60 years of combined experience and multiple professional certifications.
• Compliance with guidelines: We help ensure your valuation meets current standards. These include those from the IRS and the Association of International Certified Professional Accountants (AICPA).
• Comprehensive support: We can assist you at any critical juncture of the valuation process.
• Collaborative approach: We leverage a diverse team of tax, accounting, transaction and assurance professionals.
• Direct leadership access: You’ll work directly with practice leaders dedicated to exceptional, client-centric service.
• Depth of knowledge: We understand complex capital structures and applicable standards-driven methodologies for accurate, defensible valuations.

To learn more about how BPM can fulfill your company’s valuation needs, contact us today.

What to Watch for in the Administrative and Legislative Response 

If you’re an importer, a CFO modeling updated margin assumptions, or a tax or finance leader trying to figure out what comes next, this is what to watch for in the administrative and legislative response: 

Alternative Tariff Authority 

The administration has signaled its intent to reimpose tariffs under statutory frameworks that expressly delegate tariff authority — principally Section 232 of the Trade Expansion Act and Section 301 of the Trade Act of 1974, both of which remain in effect and are unaffected by this ruling. Watch for executive action under those authorities and be prepared to update your tariff exposure analysis if new duties are announced. 

Refund Guidance from CBP and Treasury 

Customs and Border Protection and the Treasury Department will need to issue guidance on the mechanics of refund claims — timelines, procedures, and required documentation. That guidance hasn’t been issued yet. When it is, acting quickly will matter. Filing deadlines in customs refund processes tend to be strict, and being unprepared when the window opens is a costly mistake. 

Congressional Response 

Congress could pass legislation expressly delegating broader tariff authority to the executive, effectively overriding the Court’s statutory interpretation. Whether that happens — and on what timeline — is a political question, but businesses operating under the assumption that the current legal landscape is permanent should be accounting for that uncertainty in their planning. 

Ongoing Litigation 

The ruling remanded one of the consolidated cases with instructions to dismiss for lack of jurisdiction, while affirming judgment in the other. Additional cases working through the federal courts — including class actions filed by importers seeking to recover what they paid — remain active. The outcomes of those cases may shape both the scope of recoverable duties and the timeline for any payouts. 

How the Major Questions Doctrine Shapes What Comes Next 

The majority also applied the major questions doctrine — the same framework the Court used in West Virginia v. EPA in 2022. Under that doctrine, executive actions of major economic and political significance require clear congressional authorization, not general grants of regulatory authority that have been stretched to cover the action in question. 

The breadth of the IEEPA tariffs — their scope, their duration, their capacity to reshape supply chains and raise hundreds of billions in revenue — put them squarely in that category. The statutory authority wasn’t there. That was enough. 

For businesses managing import costs and supply chain decisions, this matters beyond the immediate ruling. The major questions doctrine is now the analytical lens courts will apply to future executive tariff actions. “We invoked an emergency statute” is no longer sufficient. The statutory basis will need to do real work, and that has real implications for how durable any reimposed tariffs will prove to be. 

The Refund Process: What Getting Organized Looks Like 

Our initial piece flagged that the refund question remains open — the majority didn’t resolve it directly, and the process is expected to be complex. That’s still true. But businesses that want to be positioned to pursue claims need to start their documentation work now, not after formal guidance is issued. 

Start With Your Customs Broker 

Your customs broker is your first call. Refund claims on duties paid under IEEPA-based proclamations will flow through the customs entry process, and your broker holds the entry records that form the foundation of any claim. That relationship — and the documentation your broker maintains — is central to everything that follows. 

Beyond engaging your broker, building a credible claim file means assembling: 

• Complete entry documentation: CBP Form 7501 or equivalent, commercial invoices, packing lists, and bills of lading for each affected shipment. These records establish what was imported, when, under what tariff classification, and what duty was paid. 
• Broker invoices and duty payment records: Documentation confirming the amount of duty paid and the specific proclamation authority under which it was assessed. Separating IEEPA-based payments from Section 232 or Section 301 payments is a prerequisite for any claim, and that distinction needs to be clearly documented. 
• Internal accounting records: General ledger entries, accounts payable records, and any capitalized tariff costs. These connect your customs records to your financial statements and may be relevant for both the refund claim and any associated accounting adjustments. 
• Purchase orders and supplier contracts: Particularly important if tariff costs were embedded in your pricing arrangements, which leads directly to the next issue. 

Navigating the Pass-Through Question 

If your company absorbed IEEPA tariff costs directly – paying them to Customs without passing them through to customers – the path to a refund claim is relatively straightforward in structure, even if the process itself is not. 

If you embedded tariff costs in the prices you charged customers, the picture gets more complicated. Whether you have a legal obligation to pass refunds downstream depends on the specific language in your contracts. Some agreements include tariff escalation and de-escalation provisions that would trigger a pricing adjustment. Others are silent. Reviewing those agreements proactively – before refunds materialize – puts you in a much stronger position than managing it reactively once the money arrives. 

This is also a financial reporting question. For publicly traded companies with tariff-related disclosures, the potential for refunds may have accounting implications worth discussing with your audit team now. If tariff costs were recognized in prior periods under an assumption of permanence, those accounting treatments may warrant a fresh look as the refund landscape clarifies. 

The State and Local Tax Angle Many Companies Are Missing 

This is the dimension that most tariff coverage hasn’t addressed. And for businesses operating in states with sales taxes, it could create an unexpected compliance obligation. 

When IEEPA tariff costs were passed through to customers, those costs were typically embedded in the price of goods sold. In sales-tax states, the taxable price of a transaction generally includes any duty or tariff cost incorporated into the sale price. That means your company may have collected and remitted sales tax on a price that reflected IEEPA tariff costs. 

If those tariff costs are refunded, a straightforward question follows: does the refund create an obligation to adjust the sales tax that was collected? And if so, who bears that adjustment — the seller who remitted the tax, or the customer who bore the cost? 

The answer isn’t settled. How individual states will respond is genuinely uncertain, and state revenue departments vary significantly in how they approach situations where the taxable base of a prior transaction changes after the fact. Some may require amended returns. Others may take the position that the original transaction was taxed correctly at the time, with no adjustment required for subsequent refunds. 

If your company operates across multiple states with significant sales tax obligations and you passed IEEPA tariff costs to customers, your SALT team should be mapping your exposure now — before refund guidance is issued and before state revenue departments start raising questions. The complexity of managing this retroactively, after returns have been filed and customers have received refunds, is significantly higher than getting ahead of it. 

Where to Start Right Now 

Across all of these issues, the common thread is the same: the companies that move methodically through the analysis now will be in a far stronger position than those waiting for the full picture to emerge. A clear set of immediate priorities: 

• Contact your customs broker to pull and preserve entry records for IEEPA-affected shipments 
• Separate IEEPA tariff costs from Section 232 and Section 301 obligations in your accounting records — the refund claim will require that distinction to be well-documented 
• Review customer contracts with tariff-related pricing provisions to understand whether refund obligations flow downstream 
• If you operate in sales-tax states and passed IEEPA tariff costs to customers, engage your SALT advisors to assess potential exposure before state guidance is issued 
• For public companies, discuss the accounting and disclosure implications with your audit team, particularly if tariff costs were recognized in prior periods 
• Monitor for executive action under Section 232 or Section 301 authority, and update your exposure analysis if new duties are announced 

The legal chapter closed on February 20. The operational and tax chapter is still being written — and how well-prepared you are when the next developments arrive will depend heavily on the work you do right now. 

BPM’s international tax, corporate tax, transfer pricing, SALT, and transaction advisory teams are actively helping clients assess their specific exposure and build the documentation foundation for potential refund claims. Contact us to discuss what the ruling means for your business. 

Here’s what you need to know. 

What Is a Trump Account? 

A Trump Account is a new type of traditional individual retirement account (IRA) established under IRC §530A for the exclusive benefit of a child — the account beneficiary — not the parent or guardian. Think of it as a head-start investment account that operates like a traditional IRA during the child’s early years, then transitions fully into a standard IRA framework when the beneficiary turns 18. 

Key features include: 

• Eligible individuals: Any child under age 18 who has been issued a valid Social Security number 
• Growth period: From account establishment until the child turns 18 
• Investment requirements: Funds must be invested in a broad index of primarily U.S. equities with regulated futures contracts, with no leverage and annual fees and expenses no greater than 0.1% 
• No distributions permitted during the growth period, with limited exceptions 
• Annual contribution limit: $5,000 (indexed for inflation), from family members, employers, governments, and nonprofits combined 

After the growth period ends, the standard rules governing traditional IRAs under IRC §408 generally apply. 

The $1,000 Pilot Program Contribution 

Separately, IRC §6434 establishes a one-time $1,000 pilot program contribution from the federal government into a Trump Account for eligible children. This is a meaningful benefit worth acting on quickly. 

Who Qualifies 

To receive the $1,000 pilot program contribution, a child must: 

• Be a U.S. citizen born between January 1, 2025, and December 31, 2028 
• Have a valid Social Security number issued before the election is made 
• Be a qualifying child of the individual making the election under IRC §152(c) 
• Have no prior pilot program election processed by the IRS 

The pilot program contribution does not count toward the $5,000 annual contribution limit, and it cannot be reduced or offset by other tax debts. 

Timing Matters 

The IRS’s proposed rules are specifically designed to allow elections to be made as quickly as possible — even within weeks of a child’s birth. Based on historical equity market returns, the IRS’s own analysis shows that $1,000 invested at birth grows to a median of $6,180 by age 18, compared to just $1,160 if invested at age 17. Earlier is better. 

How to Open an Account and Make the Election 

The IRS has created Form 4547, Trump Account Election(s), to handle both the initial Trump Account election and the pilot program contribution election. Elections can also be made through an electronic application or webpage the IRS will make available. 

Who Can Make the Election 

If you’re making the pilot program election (i.e., claiming the $1,000 contribution), you automatically serve as the authorized individual to open the Trump Account at the same time — streamlining the process into a single filing. 

If no pilot program election is being made (for example, for a child born before 2025), the authorized individual follows this priority order: 

1. Legal guardian 

2. Parent 

3. Adult sibling 

4. Grandparent 

Only the first election processed by the IRS for a given child will result in an account being opened. Once processed, no further elections are allowed for that child. 

Responsible Party 

The individual who makes the election becomes the responsible party for the account while the child lacks legal capacity. This person has authority to direct investments among eligible options, authorize rollovers, and designate a successor responsible party. 

Employer Contributions: A New Workforce Benefit to Consider 

Under IRC §128, employers may contribute up to $2,500 annually (indexed for inflation after 2027) to a Trump Account for an employee or an employee’s dependent. These contributions are excluded from the employee’s federal gross income, provided they are made through a qualifying Trump Account contribution program under §128(c). 

For employers exploring competitive compensation and benefits strategies, this is worth evaluating. However — and this is critical for California-based businesses — the federal tax treatment does not automatically apply at the state level. 

California Taxpayers: A Critical Disconnect 

California conforms to the Internal Revenue Code as it existed on January 1, 2025. Because IRC §530A was enacted on July 4, 2025, as part of the OBBBA, California does not conform to the Trump Account provisions. The California Franchise Tax Board (FTB) has taken the position that Trump Accounts are not recognized as tax-deferred retirement accounts for state purposes. 

What This Means in Practice 

For California taxpayers, the divergence from federal treatment is significant: 

• Investment earnings are taxed annually in California — there is no state-level tax deferral during the growth period 
• The account functions more like a UTMA (Uniform Transfers to Minors Act) account for California purposes, with earnings taxable each year to the child 
• Employer contributions under IRC §128 are taxable income in California — there is no state exclusion 
• Contributions from governments or tax-exempt organizations under IRC §139J are also not excluded from California income 
• Kiddie tax rules may apply to unearned income attributed to the child 
• Families will need to track separate federal and California basis throughout the growth period 

The One California Silver Lining 

The $1,000 pilot program contribution under IRC §6434 is the exception. Because the federal mechanism treats this contribution as a payment against the child’s federal tax liability rather than income, the FTB has indicated it would not treat the pilot contribution as California taxable income. That said, all other contributions and earnings remain subject to annual California taxation. 

Planning Ahead for the Federal-State Mismatch 

If you’re a California resident or a California employer considering Trump Account contributions as a workforce benefit, this federal-state disconnect creates real compliance and planning complexity: 

• Annual earnings must be reported and taxed at the California level each year 
• Payroll and HR teams need to understand the California income inclusion for employer contributions
• High-income families subject to California’s top marginal rates may see their effective state tax drag meaningfully reduce the projected growth benefit 
• At age 18, when the account converts to a traditional IRA, California basis calculations will differ from the federal basis — impacting future distribution planning 

What to Do Now 

These proposed rules are effective for taxable years beginning on or after January 1, 2026 — meaning the planning window is open today. Here’s how to approach the opportunity: 

• Families with newborns (2025–2028): Consider acting quickly to file Form 4547 and claim the $1,000 pilot program contribution. The earlier the election, the greater the potential growth. 
• Families with children under 18: Evaluate whether opening a Trump Account makes sense given your federal and state tax situation, contribution capacity, and long-term goals. 
• California residents: Work with your tax advisor to understand the annual earnings reporting requirements and model the after-tax growth under both federal and California rules before making contribution decisions. 
• Employers: Analyze whether a Trump Account contribution program under IRC §128 is a viable employee benefit — and model the California payroll tax implications before implementation. 

How BPM Can Help 

Trump Accounts introduce planning opportunities — but also real complexity, particularly for California families and businesses navigating the federal-state mismatch. BPM’s tax professionals work with individuals, families, and employers to analyze how new legislation applies to your specific situation and structure your approach thoughtfully. 

Whether you’re evaluating the $1,000 pilot program, considering employer contribution programs, or trying to understand how annual California taxation will affect your projected returns, BPM can provide the analysis and guidance you need to make informed decisions. 

This alert is intended for informational purposes only and does not constitute legal or tax advice. The IRS rules described above are in proposed form and subject to change. California tax treatment is based on currently available FTB guidance, which may be updated. Consult a qualified tax advisor regarding your specific circumstances. 

Sell-side due diligence is a comprehensive financial review (also known as quality of earnings) of your business conducted before you go to market or enter serious negotiations with buyers. Unlike traditional due diligence, which buyers perform after making an offer, sell-side due diligence puts you in the driver’s seat when selling your business. This article will explain what the process involves, what you can expect during the 60-90 day timeline, and why partnering with professionals is critical to your success. 

Understanding the Sell-Side Due Diligence Process 

Sell-side due diligence typically takes 60 to 90 days to complete. During this time, qualified professionals will examine every aspect of your business to identify potential issues before buyers do. Think of it as a pre-inspection before listing your house for sale. You want to find and fix problems on your own terms, not during negotiations when your leverage is weakest. 

The process covers four main areas: financial records, legal and compliance matters, operational systems, and strategic positioning. Each area requires careful attention and documentation. 

What Happens During the First 30 Days 

The initial phase focuses on gathering and organizing documentation. Your professional team will request financial statements, tax returns, contracts, employee records, and operational procedures. This might feel overwhelming, but it’s necessary. 

During this period, you’ll work closely with accountants and advisors to ensure your financial records are accurate and complete. They’ll review your revenue recognition policies, examine your balance sheet, and identify any accounting irregularities that need correction. You’ll also begin compiling legal documents, including corporate records, intellectual property registrations, and material contracts. 

Many business owners discover gaps in their documentation during this phase. Missing contracts, outdated employee agreements, or incomplete financial records all surface now rather than later. Your team will help you fill these gaps systematically. 

Days 30-60: Deep Analysis and Problem-Solving 

The middle phase involves detailed analysis of the information gathered. Your advisors will scrutinize your financial performance, looking for trends, anomalies, and areas that might raise buyer concerns. They’ll examine your customer concentration, supplier relationships, and revenue stability. 

This is also when legal and compliance reviews intensify. Attorneys will identify any potential liabilities, pending litigation, or regulatory issues. They’ll review your contracts for change-of-control provisions that could affect the transaction. Employment matters, including benefit plans and key employee agreements, receive a thorough examination. 

Operational assessments happen concurrently. Your team will evaluate your business processes, technology systems, and organizational structure. They’ll identify dependencies on key personnel and assess whether your business can run without you. These insights are valuable not just for the sale but for strengthening your business overall. 

Days 60-90: Documentation and Presentation 

The final phase focuses on creating a comprehensive due diligence package. Your team will organize all findings into a clear, professional presentation that tells your business story effectively. This includes a quality of earnings report, normalized financial statements, and detailed explanations of any adjustments. 

You’ll also develop a management presentation that highlights your company’s strengths, growth opportunities, and competitive advantages. This document becomes a powerful tool during buyer negotiations because it demonstrates transparency and preparedness. 

Any issues identified during the process should be addressed by now. Some problems can be fixed completely, while others may require disclosure with mitigation strategies. Your advisors will help you determine the best approach for each situation. 

Why You Need Professional Help 

Sell-side due diligence isn’t a DIY project. The process requires specialized knowledge across accounting, legal, tax, and operational domains. Professionals, including your investment banker (if one is hired), bring objectivity that you simply can’t have about your own business. They know what buyers look for and what issues can derail deals.   

Working with experienced advisors also sends a strong signal to buyers. It shows you’re serious, organized, and committed to transparency. Buyers feel more confident when they see a professionally prepared due diligence package, which can translate into better offers and smoother negotiations. 

Additionally, professionals help you avoid common pitfalls. They’ll catch issues you might overlook and help you present information in the most favorable light without being misleading. Their experience with similar transactions provides an invaluable perspective on what’s normal and what requires attention.  

Partner With BPM for Your Sell-Side Due Diligence 

At BPM, we understand that selling your business is both a financial transaction and an emotional journey. Our team has guided countless business owners through successful exits by conducting thorough sell-side due diligence that positions them for optimal outcomes. We take the time to understand your unique situation and develop a customized approach that addresses your specific needs and goals. 

Don’t leave your business sale to chance. Let BPM help you prepare comprehensively, anticipate buyer concerns, and present your business in the best possible light. To discuss how our sell-side due diligence services can help you achieve the successful exit you’ve worked so hard to earn, contact us.  

Whether you’re looking to diversify your portfolio, generate steady cash flow, or explore new asset classes, understanding how to invest in REITs can open doors to new opportunities for your organization. 

The Basics of REITs 

When it comes to investing in real estate investment trusts (REITs), the concept is refreshingly straightforward. REITs are companies that own, operate, or finance income-producing real estate—think office buildings, shopping centers, apartments, and more.  

By purchasing shares of a REIT, your business can access the benefits of commercial real estate, such as regular dividend income and portfolio diversification, without the need to directly buy or manage properties. If you’d like a deeper dive into the fundamentals, visit our comprehensive guide to what REITs are. 

Why REITs Appeal to Businesses 

REITs have become a go-to investment for businesses seeking more than just traditional stocks and bonds. The main reasons include: 

• Diversification benefits – REITs introduce a new asset class that doesn’t move in lockstep with traditional stocks and bonds, helping smooth out portfolio performance when other investments underperform 
• Steady cash flow – REITs are legally required to distribute at least 90% of taxable income as dividends, providing businesses with regular, predictable income streams often at higher yields than other equities 
• Real estate exposure without ownership hassles – Businesses can participate in commercial real estate income and appreciation without managing properties, negotiating leases, or handling maintenance 
• Flexibility and scalability – Easy to adjust real estate exposure by buying or selling REIT shares, allowing businesses to focus their energy on core operations rather than property management 

• Risk reduction – Real estate returns are influenced by different factors (local economies, property trends, rental income) than traditional investments, providing built-in portfolio balance 

4 Ways Businesses Can Invest in REITs 

Businesses have a variety of ways to invest in REITs, each with its own advantages and considerations. Understanding your options can help you find the right fit for your organization’s goals, risk profile, and operational needs. 

1. Direct Investment in REIT Stocks 

Purchase shares of individual publicly traded REITs through a brokerage account. This gives you direct exposure to specific real estate sectors—office buildings, shopping centers, or apartments—letting you tailor investments to your business strategy. 

When evaluating individual REITs, focus on sector focus, management quality, dividend history, and the underlying property portfolio. 

2. REIT Mutual Funds 

These funds pool capital from multiple investors and are professionally managed across a diversified basket of REITs. They offer built-in diversification and professional oversight, reducing single-REIT risk. Perfect for businesses wanting broad real estate exposure with a hands-off approach. 

3. REIT Exchange-Traded Funds (ETFs) 

REIT ETFs trade like stocks and provide instant diversification across multiple REITs. They combine stock-like liquidity with mutual fund diversification, typically featuring lower fees and all-day trading flexibility. 

4. Indirect Investment Via Retirement Plans 

Many workplace retirement plans offer REIT access through mutual funds or ETFs. This efficiently provides employees with real estate exposure while supporting long-term financial wellness. 

No matter which route you choose, aligning your REIT investments with your organization’s objectives and risk tolerance is key. Each option offers a different balance of control, diversification, and complexity—so you can select the approach that best supports your business’s growth and financial strategy. 

Types of REITs You Need to Know About 

REITs come in several forms, each offering unique benefits and considerations for business investors. Understanding these REIT types can help you select the right fit for your organization’s goals and risk profile. 

Equity REITs 

Equity REITs own and operate income-producing real estate, such as office buildings, shopping centers, apartments, and industrial properties. These REITs generate revenue primarily by leasing space and collecting rents from tenants. Their income is closely tied to the performance of the underlying real estate market, and they often provide steady dividend income along with the potential for property value appreciation over time. 

Mortgage REITs 

Mortgage REITs (often called mREITs) don’t own properties directly. Instead, they invest in mortgages and mortgage-backed securities, earning income from the interest on these loans.  

Mortgage REITs can offer higher yields than equity REITs but are more sensitive to changes in interest rates and broader economic conditions. Their returns depend on the spread between the interest income from their mortgage assets and their own borrowing costs, making risk management and market awareness especially important. 

Hybrid REITs 

Hybrid REITs combine the strategies of both equity and mortgage REITs. They invest in both physical properties and mortgages or mortgage-backed securities. This flexible approach allows hybrid REITs to shift their focus between property ownership and mortgage investments based on changing market conditions. For businesses, hybrid REITs can offer a balanced income stream and potentially act as a buffer against market volatility. 

Publicly Traded REITs 

Publicly traded REITs are listed on major stock exchanges. They offer transparency, liquidity, and ease of access—you can buy and sell shares just like any other stock. This makes them a practical choice for businesses seeking flexibility and the ability to adjust their real estate exposure quickly. 

Public Non-Traded REITs 

Public non-traded REITs are registered with the Securities and Exchange Commission (SEC) but are not listed on stock exchanges. While they can provide access to commercial real estate, they tend to be less liquid and may charge higher fees. Their share values aren’t as readily available, and investors may face restrictions on when and how they can sell their holdings. 

Private REITs 

Private REITs are not registered with the SEC and do not trade on public exchanges. They are typically available only to institutional or accredited investors. Private REITs often require higher minimum investments and provide less transparency, but they may offer access to unique real estate opportunities not available in public markets. 

Each type of REIT brings its own mix of income potential, risk, and operational complexity. By understanding these distinctions, your business can make more informed decisions about how to invest in REITs and build a portfolio that supports your long-term objectives. 

Comparing REIT Investment Options 

Let’s take a look at how these options stack up against key investment criteria.  

Key Considerations (and Risks) for Business Investors 

Before your business invests in REITs, it’s important to understand the key considerations and risks that come with this unique asset class. By being proactive and informed, you can make decisions that align with your organization’s goals and risk tolerance. 

• Market and sector risks: REITs are tied to real estate market health and economic cycles. Property value shifts, commercial space demand changes, or tenant defaults can impact investments. Different REIT types (office, retail, industrial) respond differently to market trends. 
• Interest rate sensitivity: Interest rates directly influence REIT performance. Mortgage REITs are particularly sensitive since their income depends on the spread between borrowing costs and mortgage interest. Rising rates can affect property values and capital costs, potentially reducing returns. 
• Liquidity: Investment liquidity varies by REIT type. Publicly traded REITs offer high liquidity for quick adjustments. Non-traded and private REITs are less liquid, potentially tying up capital longer with exit restrictions. 
• Tax implications: REITs distribute most taxable income as dividends, typically taxed as ordinary income rather than at lower qualified dividend rates. Consider holding REIT investments in tax-advantaged accounts to manage overall tax liability. 
• Regulatory and governance factors: Publicly traded REITs provide transparency through SEC registration and regular reporting. Non-traded and private REITs may offer less operational visibility, increasing risk. Always review governance structures and regulatory compliance before committing capital.  

By weighing these factors, your business can approach REIT investing with confidence and clarity, positioning your organization for sustainable growth and resilient income streams. 

REIT Investment Checklist  

Here’s a quick checklist to guide your business through the REIT investment process: 

• Define your investment objectives: income, capital appreciation, diversification, or inflation hedge. 
• Assess your organization’s risk tolerance and liquidity needs. 
• Conduct due diligence: 
  • Review REIT portfolios, tenant quality, lease terms, property types, and geographic focus. 
  • Analyze key financial metrics like FFO (Funds From Operations), AFFO (Adjusted Funds From Operations), NAV (Net Asset Value), and dividend sustainability. 
  • Evaluate the management team and governance practices. 
• Understand fee structures: brokerage commissions, fund expense ratios, and management fees. 
• Monitor and review your investments regularly, keeping an eye on performance, market trends, real estate sector dynamics, and interest rate changes. 

Learn to Invest in REITs With BPM 

Real estate investment trusts (REITs) give your business new ways to generate income, diversify your portfolio, and access commercial real estate—without the complexity of direct ownership.  

If you’re ready to explore how REITs can support your growth, connect with BPM’s real estate team for tailored guidance and strategic insights. Reach out to our real estate specialists today to start the conversation.