Tax Help for Cross-Border Partners (U.K, U.S & Canada)

February 09, 2023

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

Myself (I'm in the U.S) and my partners in the U.K and Canada are looking to acquire a U.S Company which is currently an S-Corp.

What corporate tax structure would work best for all of us?

Some folks are advising that an LLC is best for the U.K partners but bad for the Canadian partner.

Some are advising that the S-corp is best for the Canadian partner but terrible (or impossible) for the U.K partners.

I'm sure there's a solution here but we can't put our fingers on it yet

Thanks

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Reply by a professional
from Villanova University in West Chester, PA, USA

Hi Chuck! I would echo ^redacted‌'s comment above. There are a number of factors to consider with respect to other available solutions: (i) whether to complete a stock purchase or asset acquisition, (ii) how the acquisition will be funded, (iii) how and when income will flow from the target company to the investors and (iv) the intended exit strategy. The deal size, potential tax liability and savings may drive the complexity of the corporate structure to address the tax needs. There are more complex corporate structures that address various tax implications, such as a loan acquisition vehicle, a two step merger, a triangular merger, tax inversion, etc. So, I would recommend a joint tax liability analysis from an accounting and legal perspective. Usually, these decisions are made through consultation with both your attorney and accountant to meet the unique needs of the transaction. Would love to chat more on this!

Reply by a professional
from Seton Hall University in Morristown, NJ 07960, USA

Hi Chuck! First and foremost one of the issues you'll run into in your post is that the S-Corp can only have US Citizens or US residents as shareholders. So there is definitely some more exploring to do. Reading a little presumptively, probably only leaves you with an LLC or a C-Corp structure. C-corp might be worth a look with the capped 21% federal rate, but have to watch the double taxation. I'd be happy to explore this with you if you'd like. You can DM me and we can set up a Zoom. Rich V.

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