Question for our great SF community:
For targets that are single-member LLCs that elect to be taxed as disregarded entities, how do you approach financial DD/QoE and financing? Especially for SBA loans, where recent tax returns are a must, I'm curious how this gets handled.
Thanks!
Single Member LLCs - DD & Financing
by a searcher from Northwestern University
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
If they are operating an entity that is a disregarded entity of a C-Corp or S-Corp or other entity, then this can be substantially more challenging if you are only buying the assets in that disregarded entity and not the assets of the entire company. Typically speaking the SBA and lender will want to see tax returns for the main operating entity. They will then need to see detailed financial statements for the disregarded entity for several years and on an interim basis, preferably prepared by an outside accounting firm that can attest to them. In these cases we can typically get something done. I have seen a few cases where the accounting firm provided audited financial statements for a division so the lender did not even end up requiring tax returns, but that is rare.
Please let me know if you have any questions or would like to discuss further at any time at --@----.com Thank you.