Newsroom - June 2008

For over a year, the tax team has been working with a commercial construction client (which was originally incorporated by the Firm in 1981) to find a way to transition ownership from the original shareholders to the younger management team. The client specializes in office interiors, with revenues of approximately $100,000,000 per year.

The Company originally was a C Corporation but, in 1986, converted to an S corporation and continues to be an S corporation. S corporations, while permitting a flow–through of tax consequences, have numerous operational tax drawbacks (one class of stock, all dividends must be equal, no preferred returns, etc.). Consequently, we used a relatively new structure involving the creation of an LLC, as follows:

  1. The client created a new LLC and transferred all of its assets and liabilities to the LLC. The new LLC continued the business of the client.
  2. The management team then contributed cash to the LLC for a 25% interest./li>
  3. Over time, the client will receive preferred distributions (which are permitted in an LLC but not in an S corporation) and its percentage ownership will be reduced as the preferred distributions are paid./li>

It is anticipated that, after 4 or 5 years, the client's ownership interest will be reduced to zero and the new LLC will be owned entirely by the management team.

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Upcoming Events

2/28/2019 - Tracy Field, a healthcare partner in our Atlanta office, will be presenting "Legal and Practical Considerations in Analyzing Potential Overpayments" at the Long Term Care and the Law program for the American Health Lawyers Association in Phoenix, Arizona, on February 28 and March 1.

3/29/2019 - Tracy Field, a healthcare partner in our Atlanta office, will be presenting "Anatomy of an Overpayment Analysis for Providers" at the North Carolina Healthcare Financial Management Association's 2019 Annual Conference in Pine Hurst, North Carolina, on March 29.

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