If you are expanding your business by acquiring another company that is an S Corp, there is a tax-favorable way to structure the deal that allows you to make it a stock purchase while also having the transaction treated as a direct asset purchase for tax purposes.
When purchasing an S corporation, the usual approach is to buy the company’s assets, rather than its stock. This offers several benefits, including protection from legal responsibility for any unknown or contingent liabilities the S Corp may have. You can also step up the tax basis of the acquired assets to reflect the purchase price, generating more substantial tax deductions. Continue reading