Electronic Security Alarm Group

For example, a long-time industry client recently approached us to represent its interests in an acquisition. Our client, the buyer, believed the transaction would generate significant synergies in its business, post-closing. The client and seller structured the proposed deal as an acquisition of a portion of seller's stock and entered into a letter of intent without the benefit of our counsel. Our client, a limited liability company with several individual members, was a "non-qualifying entity" under the Internal Revenue Code. The seller was a sub-chapter S corporation. Accordingly, the proposed acquisition would have defeated the seller's sub-chapter S standing, a potentially disastrous result for buyer and seller.

We promptly identified the salient issues and re-structured the transaction. At our recommendation, our client and seller agreed to contribute their operating assets to a new limited liability company. As a result of this new structure, the parties could complete their merger and join forces to reap the benefit of the desired synergies in a significantly more tax advantageous manner. Perhaps most importantly, however, from our client's perspective, the new operating company could elect to amortize a significant portion of the purchase price for federal income tax purposes, resulting in our client saving nearly one-third of the aggregate purchase price in future federal income taxes!