Have a Tax Question? Ask a Tax Expert
Hi. Great Question.
One advantage - if the holding company owns 80 percent of the voting stock of another company (the subsidiary), the holding company can qualify for tax-free dividends.
The S-Corp can provide the monetary means and capability to jump start new companies and products.
An example for an advantage is an S corp may see a new product or marketing opportunity with circumstances that make owning an LLC for this opportunity advantageous. Buying or forming an LLC, owned by the S corp may be operationally more cost efficient.
On the tax-side, both are pass-through entities and have limited liability.
Let me know if you have any questions. Thank you.
Hi. I would first look in your LLC agreement for any "Buy-Sell" provisions, which can help the transfer/sale/purchase go smoothly and avoid disruptions. If you don’t have a buy-sell provision, you would need to draft the terms of the sale, which can initially be included in a term sheet or memorandum of understanding, followed by a more formal contract For that, you would need a lawyer to draft one up, since this it need very intricate legal terms in it.