Legal Question in Business Law in California

Re: dba

Probably......the difficulty in giving you a definite answer is that to "buy a business" can have several different meanings: buying assets, buying stock of another "S," buying stock of a "C" corporation, or merging where the acquiring, or acquired, or a newly-created third corporation is the surviving entity.

With that range of possibilities, and perhaps others not mentioned, you should be aware that the possibility of problems ranges from almost nil to medium.

If you were, for example, acquiring the assets of another business, no problem. "S" corporations can also now have subsidiaries which are also "S" corporations with some restrictions, one of which is it must own 100% of the subsidiary; and it may control "C" corporations by stock ownership of varying percentges, but may not file consolidated tax returns with them.

However, if actual or de facto mergers occur, it would be necessary to see whether the resulting (surviving) entity is qualified to be an "S" corporation. Loss of qualification could result from a number of sources, including having too many stockholders, or a prohibited kind of stockholder, e.g., a nonresident alien, or anyone who refuses to join in signing an "S" election on IRS Form 2553.

The use of a dba is also permissible. Keep in mind that if the acquired business retains its separate corporate identity, that identity is REAL and not fictitious, and the subsidiary may do business under its corporate name without the necessity of filing and publishing a fictitious business name registration.