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

by a searcher from University of Virginia

1 year ago

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?

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18 comments

searcher from University of Kansas

following

11 months ago | like reply | 0 likes

professional from New York University

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. --@----.com if you'd like to discuss.

1 year ago | like reply | 2 likes

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