Affiliated Service Group?

[Dougsbpc]

We have a prospective client that has 50% ownership in two entities. They do not have a controlled group but meet most of the criteria of being an affiliated service group.

They are in the lending business. They basically attract investors and then make loans to businesses in a specific industry. The prospect has a lot of knowledge in that industry.

Generally, a service organization is one in which capital is not a material income producing factor. In this case, capital is a material income producing factor. In every other respect, the entities resemble service organizations that together provide services. Would these be considered service organizations?

Thanks.