KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Comment on Do you need separate entity or dba  
January 29,  2025
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Comment on Do you need separate entity or dba from article on January 11, 2025
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Ken,
    Responding to your reader who asked:
    When an alarm company purchases another company but wants to continue to operate it under its original name is it sufficient to use a DBA? 
    He either hasn’t spoken with his tax advisor or needs to find one that understands acquisitions.  Nearly all of the alarm company transactions are asset purchases.  The buyer buys certain assets from the selling company (substantially the monitored accounts, the company name, fixed assets, and phone lines) not the stock of the selling company.     This is done for numerous reasons including the fact that the purchasing company can put these assets on their books and amortize (effectively depreciate) them over 15 years.  This is referred to as “Stepped up Basis.”  If they purchase the stock of the business there are no assets to amortize.  Since the acquiring company typically purchases the name, it can use it going forward as a dba.  Since the selling company has simply sold assets, and not stock, it continues in existence and the shareholder(s) simply change the name.  I am not an attorney so I will leave the caveats about stock purchases to you. 
     On occasion, the seller may have licenses, customer agreements, etc… that are not transferable so the buyer will purchase the stock, but this can be structured as a purchase of assets for tax purposes (IRS Section 338(h)(10)) but this type of transaction is complex and rare. 
      If your reader is contemplating the purchase of an alarm company he should make certain that his tax advisor is experienced in transactional accounting; most are not. 
 Mitch Reitman  
817 698 9999 XT 101
Reitman Consulting Group
5408 Woodway Drive|Fort Worth, TX 76133 | 817-698-9999 o | 817-698-0009 f
http://www.reitman.us
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Response
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          There are a number of ways to continue to use the name of the seller, or at least a similar name.  One way is a requirement that the seller change its name, thereby making that name available for a new entity.  Another is buyer uses a dba, doing business as, with a similar name. 
          Do not think you can do a buy-sell on your own; do not think your accountant or a broker can handle it and properly represent you.  If they do you got lucky.  You need an attorney, and one familiar with this industry, not an expert in some other law.  You will also need your accountant and if you dont have one or your accountant is not up to snuff, Mitch is the right choice. 
          The asset purchase is almost always the preferred transaction, though stock deals are not uncommon.  The stock deal will require additional time and perhaps risk because the buyer is stepping into the shoes of the seller.  Buyers need to be sure the seller hasn’t stepped in shit.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com