Preferred Legal Structure for Parent Company and Sub-sequent Acquisitions

by a searcher from Florida International University - College of Business

3 years ago

I'm interested in hearing your insight regarding the company creation. We need to create the Legal Entity for the Parent Compay
We were thinking of Creating a Delaware C Corp and Each Acquisition to be an LLC owned by the Parent company. However, as far as taxes what is the best way to reduce the impact on taxes when we are to pay personal Taxes?

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6 comments

professional from Walsh College of Accountancy and Business Administration

Your facts matter and you need legal and tax advisor to help you with developing the structure that fits your needs and wants. There are a lot of different structures and entity choices.

3 years ago | like reply | 0 likes

searcher from Stanford University

This is not legal or tax advice — you should consult an attorney and a tax advisor. That being said, I have represented a very significant number of private equity funds over my career (ranging in AUM from $100M - +100B, domestic and international), I can say that I’ve never seen a C Corp TopCo. I do private equity m&a all day every day and I’ve never seen that structure. Maybe in a venture or early stage scenario where you’re dealing with non-U.S. equityholders or LPs (VCs are reticent to fund into anything other than a C Corp for this reason), it may become more relevant because some jurisdictions don’t recognize a tax equivalent of the US LLC, but I’ve always seen a TopCo be an LLC. The OpCos down below may vary (LLC, C Corp), and there may be (i.e., more frequently than not in platform/add-on strategies) intermediatecos for debt financing purposes between the entities. Partnership taxation can get very complicated and can create significant issues at exit, both from the perspective of actually getting the deal done and from the perspective of the order of magnitude of proceeds that can tax-efficiently go to selling equityholders, so I would spend the money now and make sure you’re getting good advice.

3 years ago | like reply | 2 likes

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