Advice for a C-Corp acquisition with some retained equity for sellers

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by a searcher from University of Virginia
in Nashville, TN, USA

1yr ago

Advice for a C-Corp acquisition with some retained equity for sellers

Hi - I'm looking for some advice on structuring a deal for a c-corp. I'm unfamiliar with many of the legal/tax nuances that come along with a C-Corp, so hoping there's someone who's willing to elaborate on considerations I should keep in mind while negotiating purchase price and structure. A few notes: 1) they've been carrying forward some NOLs from 2020; 2) there are 3 key employees that are minority owners that may want to keep some equity. Some specific questions I have:

1. Asset vs stock sale - beyond the standard difference of these two transaction types (e.g. liability, step-up in assets for depreciation), is there anything specific to the entity being a c-corp that I need to keep in mind? The seller has specifically mentioned he doesn't want to do an asset sale because of the tax implications, but could the NOLs offset some/all of the tax liability if we were to do an asset sale .
2. Company structure - might be related to the questions above, but what are the pros/cons of keeping as a c-corp vs converting to an LLC?
3. Retained equity - what do I need to keep in mind in the event that one/all of the minority owners want to keep their ownership %'s (all under 10% individually and under <20% in aggregate).
4. SBA financing - anything I need to keep in mind as it relates to debt financing if I wanted to use a 7(a) loan?
5. I'm sure there are other key questions related to the selling entity being a c-corp that I should be asking so let me know what other info I should be asking the seller that could make a material impact on deal structure

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reply by a lender 1yr ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

I would be happy to have a discussion and weigh in on the debt options. What I can tell you right now is if you want to use an SBA 7A loan and any of the minority seller's want to retain their equity position, then you would need to structure the deal as a stock purchase. However, it might be possible for you to convert the company after acquisition to another type of entity. That is really more of a question for an accountant or tax attorney. Please let me know if you would like to discuss options in more detail. You can reach me here or directly at redacted Good luck.

reply by a professional 1yr ago
from University of Michigan in Detroit, MI, USA

Hi ^redacted‌, you're asking great questions. Yet the answers mostly depend on your specific circumstances. Let me know if you want to discuss over the phone. I can't promise we'll solve all the issues in the space of 30 minutes. But we might get some of the way down the road. My law firm, Groundswell Advisors, LLP, is focused on helping entrepreneurs buy and sell SMBs. So I'm confident I can help to some extent. Reach out here via DM or directly at redacted