Should I incorporate (LLC) prior to acquiring?

September 30, 2023

by a searcher from Northwestern University - Kellogg School of Management in Newtown, PA 18940, USA

As I'm just getting my search off the ground I'm curious if I should be thinking about forming an LLC now prior to find a target and providing LOI? The benefit I see might be expenses run through the LLC but is the end game for the search LLC to acquire the target? Any other benefits to forming the LLC now?

No plans for partners, likely bank / SBA loan / seller finance. Thanks for the help. Reading books and posts regularly. Cheers.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

There is no need to create the LLC in advance. Many buyers will execute an LOI in their personal name and include a clause allowing them to assign it purchase to a business entity of their choosing. You should ask your accountant if there is a benefit to setting it up sooner to expense costs related to the search. I think technically you could operate as a business under your own name and incorporate later, and still expense everything, but you should check with your accountant to be sure. It is not typically that expensive to go online to your Secretary of State office and incorporate a business and then go online to the IRS and request an EIN number. You would not need to set up the legal side (operating agreement or by-laws) to a much later date. The biggest expense is the one time setup fee with the State and the annual filing fees, which usually are not that much money. However, I know when searching you are probably trying to save every penny possible.

Happy to discuss in more detail at any time. If you need any assistance from a financing perspective we are also more than willing to help out. You can reach me here or directly at redacted Good luck with your search!

Reply by a searcher
from Lake Forest Graduate School of Management in Tustin, CA, USA

Hey Brad, I found this post in a search and found it very helpful. Thank You!

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