I am looking at using an SBA loan to acquire a 25+ year old commercial cleaning company that was last sold 2 years ago. Organized as S-corp. Seller pushing for stock purchase agreement due to large number and type of contracts and fleet of vehicles. Lower middle market. Working with an attorney already, but his advice is just to avoid SPA, and I'm looking for solutions. He suggested purchasing as 336(e) held by an LLC treated as a disregarded entity.

Seller is open to 338(h)(10)/336(e) special election, so that solves the depreciation problem.

I am trying to figure out a way to get around the liability issue of 25+ years of unknowns under the same S-Corp, and most of that under a prior owner I can't even talk to.

Looked into TLPE insurance (micro R&W), but it seems like a policy would only cover the period of###-###-#### back to last sale).

Is there protection through doing an F-reorg or other entity conversion? Or is the only way to shed liability at sale time through APA?

Am I just overestimating the risk profile here? Or do you guys just treat it like driving into a roundabout, close your eyes and hope for the best?