Bedrock Tax Aware Investing

Tax awareness is a core element of long-term wealth creation. While investment performance drives returns, taxes determine how much of those returns investors ultimately keep. Bedrock structures its fund operations to support efficient tax outcomes, especially for investors allocating capital through an entity such as an LLC, LP, S Corporation or C Corporation.

The goal is to provide clarity on how investment income flows from the Bedrock Fund to the investor’s entity and then to the ultimate owners. Investors can use this information to understand how their structure affects their after-tax results.

Why Tax Awareness Matters

Every dollar of performance is subject to tax rules that can either enhance or erode long-term compounding. When investment income is passed through efficiently, investors retain more of their gains and suffer fewer tax frictions. When income is taxed multiple times, returns can be materially reduced.

Entity selection plays an important role in the tax outcome. Bedrock provides transparent insight so investors can choose an approach that aligns with their objectives.

How Bedrock Income Flows Through to Entity Investors

When an investor allocates capital to the Bedrock Fund through an entity such as an LLC, LP, S Corporation or C Corporation, taxes are applied based on the entity’s tax classification. Although the Bedrock Fund itself does not pay federal income tax when structured as a partnership, the investor’s entity may receive and distribute income differently.

Below is a clear breakdown of how income flows through the Bedrock Fund and how taxes apply at each level.

LLC, LP or S Corporation (Pass-Through Entity)

Most investors choose to invest through a pass-through entity because it preserves the character of investment income and avoids double taxation. Under this structure, the Bedrock Fund allocates all income directly to the entity, which then allocates it to its owners.

How it works

1. The Bedrock Fund earns dividends, interest and capital gains.
2. The Fund passes this income to the investor’s LLC, LP or S Corporation through a Schedule K-1.
3. The investor entity does not pay federal income tax.
4. The entity issues its own K-1s to its members, partners or shareholders.
5. Each owner reports the income on their individual return.

Character of income is preserved

• Qualified dividends remain qualified dividends.
• Long-term capital gains remain long-term capital gains.
• Short-term gains and interest retain their character.

This is known as "character retention" and it ensures that owners receive the appropriate tax rates on each type of income.

Tax impact

• Single layer of tax at the individual level.
• Owners pay capital gains and dividend rates, which are generally lower than ordinary rates.
• No corporate-level tax.
• No double taxation.
• Efficient for long-term compounding.

Who this benefits

• Professionals and founders holding ownership through an LLC or LP.
• Real estate investors who aggregate investments through an entity.
• Family offices and high-net-worth individuals using S Corporations.
• Anyone seeking to maximize after-tax returns and reduce unnecessary tax drag.

C Corporation (Entity-Level Taxation)

Some investors choose a C Corporation structure. This framework provides liability and governance benefits but has meaningful tax friction. In a C Corporation, investment income is taxed twice.

How it works

1. The Bedrock Fund earns dividends and capital gains.
2. The Fund allocates this income to the C Corporation through a K-1.
3. The C Corporation pays federal tax at the corporate rate (currently 21 percent).
4. When the corporation distributes earnings to its owners, the distribution is treated as a dividend.
5. Owners pay personal tax again on the dividend.

Tax impact

• First layer: 21 percent corporate tax at the entity level.
• Second layer: 15 to 20 percent dividend tax at the shareholder level.
• Combined effective tax burden: approximately 35 to 37 percent.
• Less efficient for long-term compounding.

Who this benefits

• Investors who require liability separation through a corporate structure.
• Businesses investing discretionary capital through their own corporate entity.
• Organizations where strategic governance outweighs tax efficiency.

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How Bedrock Income Flows Through to Entity Investors

When an investor allocates capital to the Bedrock Fund through an entity such as an LLC, LP, S Corporation or C Corporation, taxes are applied based on the entity’s tax classification. Although the Bedrock Fund itself does not pay federal income tax when structured as a partnership, the investor’s entity may receive and distribute income differently.

Below is a clear breakdown of how income flows through the Bedrock Fund and how taxes apply at each level.