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April 21, 2023

by a searcher from Salisbury University - Franklin P. Perdue School of Business in Virginia Beach, VA, USA

I"m acquiring Company A via SBA loan

- Purchased by my ABC Holding Company (C Corp)- I own 100% of the shares

2-3 months later I'll be acquiring Company B via Private Lender. The funds from this private lender are to acquire both Company A & Company B, paying off the SBA loan for Company A immediately. The only purpose of acquiring company A with SBA loan earlier is due to timing. The seller doesn't and won't wait another 2-3 months to close.

- Purchased by DEF Holding Company (C Corp) with 4 partners

DEF Holding Company will then own both Company A & Company B


The Question- What is the most tax efficient way to do this for me?

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commentor profile
Reply by a searcher
in Portland, OR, USA
I'd suggest exploring the following options to optimize tax efficiency in your acquisitions: Assess Stock vs. Asset Purchase: Analyze tax implications for each acquisition method, considering factors like target companies' liabilities and tax attributes.

Loan Interest Deductibility: Ensure interest expenses on SBA and private loans are tax-deductible, optimizing debt structure and minimizing tax burden.

Utilize 338(h)(10) Election: If eligible, consider a 338(h)(10) election to treat the stock purchase as an asset purchase, providing potential tax benefits.

Consult a tax advisor to tailor these strategies to your specific circumstances.
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Reply by a professional
from Seton Hall University in Morristown, NJ 07960, USA
Hi Chuck - good to see you. Happy to help if I can, but my immediate question is whether or not paying off the SBA loan on Company 1 has a prepayment penalty? I thought you pay both an upfront inception fee and there's a declining (over time) prepayment penalty if you pay off in the first years. Beyond that would be happy to explore this with you. Let me know!
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