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ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 352
Experience:  Business Consultant/Accounting Manager
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What are the advantages and disadvantages of having an

Customer Question

What are the advantages and disadvantages of having an Corporation(S) own an LLC?
Basically having a corporation as a holding company
Submitted: 2 months ago.
Category: Tax
Expert:  ABC Accounting Group replied 2 months ago.

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.

Expert:  ABC Accounting Group replied 2 months ago.

On the tax-side, both are pass-through entities and have limited liability.

Expert:  ABC Accounting Group replied 2 months ago.

Let me know if you have any questions. Thank you.

Customer: replied 2 months ago.
How would you go about selling the LLC to the S-Corporation?
Expert:  ABC Accounting Group replied 2 months ago.

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.