I own an S Corp which owns two LLCs that passthrough to the S Corp tax return. I am looking to purchase two additional businesses that are currently stand-alone S Corps. I would like them to also passthrough to my parent company S Corp. From my research, it sounds like as long as the parent S Corp owns 100% of the shares of each of the new S Corps, I can file form 8869 after the acquisition to obtain QSUB status. I have two questions about this, first, how would we handle a mid-year election since the acquisitions are both scheduled to close on 3/31/2021? Second, the seller will be carrying the contract on two businesses and will hold them as collateral. They are concerned about our intent to convert them to a QSUB should there be a default and they need to take the businesses back. If this were to happen, wouldn't all shares just transfer back to them from the parent S Corp and they would continue to file a separate tax return as they do today? Any other thoughts or recommendations on this structure would be much appreciated.
