I am doing due diligence on a company that is much larger than others I have looked at so far. The company is very asset light so depreciation would be minimal and amortization has been ignored due to the long write-off period. The acquiring entity will be taxed as an S-corp and I will have 100% equity. The following thought came to mind. Imagine the following scenario:
EBITDA/cash flow: $2,500,000
Enterprise value: $10,000,000
Equity injection: $1,000,000
Bank financing: $4,000,###-###-#### year term, 6% APR, $55.5k monthly payment)
Seller carry: $5,000,###-###-#### year term, 6% APR, $77.3k)
Net Income (ignoring amortization - EBITDA less interest payments): $1.989mm
EBITDA after debt service: $905.9k
US federal taxes due on Net Income in the first year: $903.4k
Am I missing something here? If I do this deal I will barely be able to afford the taxes. As loan payments shift to have lower interest each month/year the situation only worsens. If I'm thinking about this correctly, how can I make this work? What creative yet legitimate ways are there to decrease my tax liability?
Thanks for any and all help.
What are your thoughts on the following US federal income tax situation

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You will be out of bank in <5 years (banks and seller will not allow dividends).
I tested C Corp at 21%. You will pay off bank sooner but IRR will be 66% and $1 M will be become $12.7 M..
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