Preferred entity structure when acquiring a new business?
July 25, 2024
by a searcher from New York University - Leonard N. Stern School of Business in West Palm Beach, FL, USA
Hi Everyone,
I hope this message finds you well. I am seeking your insights on the preferred entity structure when acquiring a new business. Specifically, I am interested in understanding the best practices and preferences, particularly in the context of an asset-only deal.
Your expertise and experiences would be greatly appreciated.
Thank you in advance for your valuable input.
from Wright State University in Bellefontaine, OH 43311, USA
As an accountant we typically work with the buyer and their legal team to determine what this should be. There are a lot of cases that an LLC makes sense but that is not a blanket statement for sure. Even with that, is this taxed as a partnership, S-Corp, Corp? Are we looking for QSBS? Do we need to do preferred returns? Is there a waterfall structure with your investors? Are you looking to do a rollup? Do you need a tiered entity structure? etc etc.
Without knowing the deal and the outcomes you are trying to achieve, it is really hard to determine the right entity structure.
from University of Toronto in Toronto, ON, Canada
For the US, I'd think an S-Corp otherwise an LLC might due but it does not give the same level of protection - however easier/faster to setup.
For Canada, a numbered limited co serves the same purpose to protect personal assets.
Only caveat is financing might be better if approached with an established corporation.
Always speak to your lawyer and accountant first. Good luck!