Experience with F Reorgs

October 10, 2021

by a searcher from Miami University of Ohio in Barcelona, Spain

Does anyone here have experience doing F Reorgs or a 338f?

We are acquiring an LLC via a stock purchase (certain complexities prohibit us from doing asset purchase).

The company is a SaaS company, and we plan to acquire it using a C-Corp to take advantage of QSBS opportunities in the future.

Any experience with F Reorgs we should look out for, how much should it cost?

Any good professionals you could recommend?

Any disadvantages for the seller?

Any other simpler options to depreciate stock purchase like an asset purchase?

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Reply by a professional
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA

Assuming the LLC target elected to be taxed as an S-Corporation? I would do an F-Reorg over a section 338 election everyday because it avoids the target having to have a valid S election. Most LLC's that elected S have issues with their S election in my experience. The F-reorg can perfect the S election by having the Target make a protective S-election with the F-reorg and make sure they do it correctly. Timing of the steps to the F-reorg are critical and certain steps must be done on different days.

I can assist you with the F-reorg steps and timing and all but 2 of the required documents / filings must be done by the attorney. You should check with your attorney, most experienced transaction attorneys can execute these in their sleep.

You can reach me at redacted if needed.

Reply by a professional
from New York University in New York, NY, USA

I agree with ^redacted‌ that the LLC would need to have elected to be taxed as an S Corp or C Corp before the acquisition, but if you just want to purchase the assets for tax purposes I think you'd want 338(h)(10) not 338(g) (which I assume you mean instead of f). I do these types of transactions all the time (both F Reorgs and h10 elections), but it really depends what you're trying to do.

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