Legal Entity & Tax Structuring for the Acquisition of an S-Corp

searcher profile

July 26, 2023

by a searcher from University of Virginia in New York, NY, USA

Currently in discussions to acquire a company that is currently structured as an S-Corp and as part of the transaction, we'd like for the seller to roll some equity.

We currently have another OpCo and aren't really sure how to think about structuring the transaction. Our OpCo currently has a handful of investors, including individuals, disregarded entities, and multi-member LLCs.

I don't believe OpCo, given it's a multi-member LLC, is able to own the S-Corp and from my limited understanding, I believe converting the S-Corp to an LLC would create an unfavorable tax consequence to the seller.

This deal could potentially be deal #2 of many, so we are also considering setting up a true HoldCo structure.

Does anyone have experience shares on how to consider or think about setting this up?

3
18
237
Replies
18
commentor profile
Reply by a professional
from George Washington University in Raleigh, NC, USA
Thanks, ^redacted‌ for the tag.

Anonymous:

It looks like you are located in or tied to Virginia, which is where our law firm is headquartered and where most of our offices are located. Feel free to drop me an email (to preserve atty/client privilege) and we'll give you a free consult and budget once we learn some additional facts, as everyone above has noted. Email: redacted - If we cannot help, we'll try and find someone who can. Best, Rick
commentor profile
Reply by a professional
from New York University in New York, NY, USA
I do this all the time. You have a few options: (1) F Reorg using Rev Proc###-###-#### then purchase the S Corp and convert it to an LLC post-close; (2) purchase using a 336(e) election then convert to an LLC post-close; or (3) if you're not buying 100%, then F Reorg using Rev Proc###-###-#### , convert the S Corp to a LLC, then purchase part of the LLC then have the historic owner contribute the remainder. I've done each of them at least a dozen times - standard stuff. redacted if you'd like to discuss.
commentor profile
+16 more replies.
Join the discussion