Mergers & Acquisitions

Mergers & Acquisitions Stephanie Pfister October 8th, 1:45 p.m. – 3:15 p.m.

Speaker Introduction

Mergers, Acquisitions, andReorganizations • Asset Acquisitions • Stock Acquisitions • “F” Reorganization • Statutory Merger • Entity Conversion • I.R.C. 338(h)(10)

Asset Acquisitions • Buyer purchases the assets of a target company (partial or total) • Typically, the acquired employees will be immediately reported on the purchaser’s payroll • In the case of partial acquisitions, the target company continues to survive and report payroll • For both partial and total acquisitions there is generally a movement of employees and related assets

Asset AcquisitionConsiderations Federal • “Successor” qualification • Carryover of YTD taxable wage bases • Tax deposit compliance/reconciliation • Payroll Systems Integration • Forms W-2 reporting (standard vs alternative) • Forms W-4 • Forms 1099 • Form 941 Schedule D

Asset Deal Considerations (con’t) State • “Successor” qualification • Carryover of YTD taxable wage bases • SUI experience transfers (optional or mandatory) • Payroll Systems Integration • State Employee Withholding Allowance Certificate • State correspondence/notification • Account closures

Stock Acquisitions • Buyer purchases the stock of a target company • Typically, the acquired company remains “alive” and all employees will continue to be reported under the target company’s payroll account numbers • Generally no change in target company’s business • Generally no initial movement of employees from target company payroll to purchaser’s payroll

Stock AcquisitionConsiderations Federal and State • There are generally no tax considerations in stock deals as the employees of the acquired company will continue to be reported under the acquired company’s federal/state ID numbers. • No Forms W-2, W-4, and 1099 issues • No SUI transfer of experience issues • Potential Payroll Systems Integration • Subsequent movement of employees

“F” Reorganization • Typically involved when a corporation changes its name, the state where it does business, or makes changes to its corporate bylaws/charter • Does not change the federal or state identification numbers of the entity • No movement of employees • No movement of assets

Statutory Merger • Also known as a “Type A” merger. It is a merger between two entities that is effected under the laws of the U.S., a state or territory or the District of Columbia. Statutes of foreign jurisdictions will also qualify as long as the statute operates in a similar manner to a domestic merger statute. • Post merger, one company continues to exist while other ceases to exist • Movement of employees and assets

Statutory MergerConsiderations Federal • “Successor” qualification • Carryover of YTD taxable wage bases • Tax deposit compliance/reconciliation • Payroll Systems Integration • Successor must file one Forms W-2 for entire year • Forms W-4 • Successor must file one Forms 1099 for entire year • Year-end notifications to IRS

Statutory Merger Considerations State • “Successor” qualification • Carryover of YTD taxable wage bases • SUI experience transfers (optional or mandatory) • Payroll Systems Integration • State Employee Withholding Allowance Certificate • State correspondence/notification • Account closure

Entity Conversion • Typically involves Corp to LLC conversion • Apply to IRS to retain FEIN • Many states require new SUI account numbers • SUI registrations must be closely monitored and reviewed • Ensure SUI rates are carried over • Agencies will help with SUI account transition • Name change required for SIT purposes

IRC 338(h)(10) • Jointly made election between purchaser and target company of a stock purchase • The stock purchase is ignored for corporate tax purposes • The target company is generally treated as having made a deemed sale of its assets and then liquidated

IRC 338(h)(10) Considerations Federal/State • Generally same considerations as that of an asset acquisition. • SUI regulations/rules should be consulted as some states will consider the transaction a stock transaction

General Considerations • Are employees AND assets involved • Are employees and assets transferring at the same time • Related party transactions • In some states, the employees are enough to establish common ownership/management • Working with 3rd party payroll processors • Local Tax compliance • Forms W-4 Compliance

Thank you and please remember to complete your evaluation for this session.

Mergers & Acquisitions