The right legal structure can protect you from financial disaster

Before we get into today’s newsletter…

I wanted to wish you a Merry Christmas from me and the Acquisition Ace team.

I’m so glad you’re here, and hope you have a wonderful holiday with friends and family!

One of the most overlooked decisions in business acquisitions is choosing the right legal structure.

Get this wrong, and you could expose yourself to unnecessary liability or pay thousands more in taxes than you need to.

Today I’ll walk you through the two main structures and when to use each one.

Option 1: Single LLC (good for your first deal)

Most first-time buyers start here, and for good reason - it’s straightforward!

You create an LLC, buy the business, and transfer the assets into that LLC.

The setup is simple, inexpensive, and gives you basic liability protection.

The downside?

This structure doesn't offer much tax efficiency, especially as you grow.

And if something goes wrong with the business (lawsuit, major debt), your personal assets could be at risk depending on how it’s structured.

It works fine for one business, but it’s not scalable.

Option 2: Holding company structure (best for multiple acquisitions)

Once you’re ready to buy your second business (or planning to), you’ll want to upgrade to a holding company structure.

Here’s how those work:

Layer 1: Create an LLC holding company

This parent company owns 100% of your operating businesses (each one is its own LLC).

This creates legal separation between each business, so if one gets sued or goes under, the others are protected.

Layer 2: Elect S-Corp taxation

You elect for your holding company to be taxed as an S-Corp (not the subsidiaries, just the parent).

All profits from your businesses flow up to the holding company, where you pay yourself a salary.

The remaining profit gets distributed to you at a lower tax rate than ordinary income, typically helping you save 5-10% on taxes.

Layer 3 (optional): Add a trust for maximum protection

For the most secure setup, create a trust that you control (you’re the trustee).

The trust owns 100% of your holding company, which owns 100% of your operating businesses.

The structure looks like this:

Trust → Holding Company → Operating Businesses

This adds another layer of asset protection and can offer estate planning benefits.

Which structure should you choose?

If you’re buying your first business, keep it simple and start with an LLC.

If you’re planning multiple acquisitions, set up the holding company structure from the beginning.

And if you’re focused on long-term wealth protection, add the trust layer once you have multiple profitable businesses.

There you have it!

If you’re looking to start building your own acquisition portfolio…

Fill out the short form below, and I’ll occasionally send you emails with interesting deal opportunities:

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Onward,

— Ben Kelly