Distributions in partial change of ownership

Member resources:

Frequent asked questions:

What is Searchfunder.com?

Searchfunder.com is an online community of searchers, investors, lenders, brokers and other professionals. Over 80% of those involved in searchfunds maintain a Searchfunder account to help them network, hire, and mentor others.

What are the benefits of membership?

In addition to accessing the most active online network of business buyers, Searchfunder licenses research that is simply not cost effective for individuals. Access over 15,000 industry reports and 50,000 transaction financials. You also get monthly credits for contact information for your company sourcing campaign with the option to purchase more at drastically discounted rates. Searchfunder has pre-purchased access from these data providers in order to empower individual buyers and to help searchers level the playing field versus private equity.

Do you have deals?

While we are primarily a buy-side network, we do have hundreds of brokers that regularly post deals to the community.

Can I find an internship on Searchfunder?

Absolutely! We have the industry's largest intern job board. If you are considering a search, the first step is to help another business buyer so you can hit the ground running.

What does it cost?

Searchfunder is a subscription service. We offer flexible monthly, annual and lifetime memberships.

Monthly

$79 / month

Annual

$19 / month

Lifetime

$432 / once

Those who maintain an account with us for over 4 continuous years are permanently added to the community without the need for a membership.

Do I need an MBA to join?

While a large number of our members come from dedicated programs at Harvard Business School, Stanford GSB, Chicago Booth, and other top programs, searching is no longer reserved for the elite. With the current abundance of dry powder in private equity, and an increasing number of business owners reaching retirement age, good deals rarely go unfunded.

Post a question, deal, job, etc...

Make a post...

Complete registration to post.

by a searcher
in Denver, CO, USA

1yr ago

Distributions in partial change of ownership

I am looking for guidance on distributions in the case of a partial change of ownership using and SBA loan. Let's say I acquire 90% of a business from the seller via stock sale using an SBA loan. I own 90% and she (seller) now owns 10%. Given this breakdown, for every dollar I distribute to myself, she would receive ~11 cents. Since I have taken the loan out on the business, are the SBA principal and interest payments essentially distributions to me, which I use to pay down the loan? I.e., if I/the business pay $100 in principal and interest in year 1, is she due ~$11, whether it be a cash distribution to her, or an increase in her capital account? Or, if we decide to distribute all cash leftover after SBA payments, does she simply get her 10% share of this post-debt cash flow?

2 Likes

166 Views

reply by a professional 1yr ago
from University of Michigan in Detroit, MI, USA

Hi Anon, I agree with Brad and the others. The business takes out the loan. You have to pay the loan before distributing cash. Is there a reason you have to buy stock? Alternatively, you could do a traditional rollover via asset sale. Happy to discuss any legal related questions. Feel free to reach out at redacted

reply by a lender 1yr ago
from University of Michigan in Indianapolis, IN, USA

For purposes of K1s you may need to make distributions to cover the tax consequences of pass through income. You'll want to establish a base salary for yourself that is distinct from distributions and then think in terms of building up the liquidity in the business instead of eyeing distributions.