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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118676
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I am in process of purchasing a business. i need assistance

Customer Question

hi i am in process of purchasing a business. i need assistance in structuring the purchase
JA: Because laws vary from state to state, could you tell me what state is this in?
Customer: florida
JA: Have you talked to a lawyer yet?
Customer: i am based out of toronto, canada
JA: Anything else you think the lawyer should know?
Customer: due to florida health state laws, i need to incorporate a US LLC to purchase the stock of an S Corp. for books, the US LLC will have to be manager-operated with a US citizen being an operator and me being a principal owner.
JA: Can you tell me what state the LLC is registered in?
Customer: florida
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Corporate Lawyer about your situation and then connect you two.
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
What specific information would you like from us? We are forbidden from representing you or anyone else from this site by state law and can only provide you information to help guide you. Please let us know.
Customer: replied 1 year ago.
Hi, I am in the process of purchasing a US business in Florida. I need to structure the investment. The current owner holds the business through an S Corp. We are looking to purchase the business through an LLC which for state filing purposes would need to be manager-managed. The manager is a US citizen and an agreement is already drafted to be signed between the manager and myself. For E2 visa purposes, is this structure acceptable considering my LLC will still own 100% of the S Corp going forward. I will still be managing the business but I just need a US citizen on the company for state filing purposes.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
Yes, it is acceptable for a non-US citizen and resident to form an LLC to have the LLC take ownership in the S-corp. Actually, once the LLC purchases the S-corp, to make things easier generally what happens is the LLC shuts down the S Corp and brings it under the LLC and operates as an LLC filing tax returns as a corporation instead of a partnership to avoid the non-resident from filing a US non-resident tax return and simplifying the process by having one company.
It is possible to do things the way you are setting them up with a US manager and it is possible to continue having the LLC own the S-corp with a manager managed LLC and a US citizen or permanent resident manager. This would be acceptable for the E-2 visa.
Customer: replied 1 year ago.
thank you for your answer. as I am based out of canada and do not at this juncture meet the substantial presence test, we want to structure the investment in such a way that we do not loose the S Corp status.... i will however be going to the USA to manage the business and within 6-8 months or so, would meet the substantial presence test and therefore can open an S corp.
Customer: replied 1 year ago.
how can this investment be structured so i can continue to meet the S corp status. Can the LLC own the S Corp and keep it under its umbrella for such time I can meet the substantial presence test.
Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

You can just have the LLC own the S-corp, yes, I said that in the second half of my answer. You can use the LLC to have the substantial presence in the US and that is fine. The first part of my answer was just a possible alternative to consider as time goes on to let you know you could eventually switch.

Customer: replied 1 year ago.
hi i am still a little confused. i have read in various places that an LLC cannot own an S corp since all shareholders of S corp have to be individuals and an LLC is treated as a corporation/partnership for tax purposes. Once the transaction does take place, the target entity will lose its S-corp status unless the substantial presence test is met or if form 2553 is filed with the IRS. Was this what you were referring to when you said the LLC can be used for substantial presence
Customer: replied 1 year ago.
i wont lose the s corp status, since this will be a manager managed LLC?
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your reply.
This is why I said the LLC will have to take over instead of the LLC, because the problem is that the LLC is considered a disregarded entity and as such as the owner of the LLC you would be considered shareholder which would be prohibited. That is why I said taking it in the name of the LLC and changing it to an LLC is the way to run with this. So, you would really not initially be able to keep it as an S-corp, you are going to have to convert the business to an LLC and then later once the substantial presence is developed you can consider to try to change back to the S-corp if you want.