This article was originally published for Tax Notes and is the first in a series of three installments.
Umbrella partnership C corporation (Up-C) structures have historically been an efficient way to facilitate an initial public offering (IPO) of a business originally operated as a partnership for U.S. federal income tax purposes. When a direct conversion of the partnership to a corporation is undesirable—for instance, because the founding partners prefer to retain all or a portion of their investment in pass-through form—the Up-C structure can be a tax-efficient way to bring a target partnership public.
The series aims to suggest structural solutions that might reduce or eliminate technical risks that can arise.
The first installment provides a basic overview of the Up-C IPO structure and includes a discussion of corporate tax considerations arising in connection with the issuance of non-economic, “super-voting” shares to the founding partners in the Up-C IPO.
The second installment will discuss specific transferor-related issues that the parties to an Up-C IPO might face when attempting to achieve tax-deferral under section 351.
The final installment will discuss investment company considerations relevant to tax-deferral under section 351 and the reorganization provisions under section 368.
BDO’s Erik Corwin provide full details in this article for Tax Notes.