S-Corporation

Question:

Who Can Own An S-Corporation?

Answer:

Once the company has formally filed with the IRS for S-Corporation status, there are restrictions on who can own the stock. The shareholders cannot be non-resident aliens, you are restricted to 100 or less shareholders and you can only issue one class of stock.

Entity Comparison Chart

The following table provides a look at the LLC vs Corporation, and LLC vs S-Corporation. Tax comparisons can be found in the lower portion of the table.


C-CORPORATION

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LLC

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S-CORPORATION

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Type of
Organization

Stock, there may be different classes.

Membership interests. There may be different classes of membership. One class of stock. Which may be voting or non-voting.
Eligible Owners No restrictions. No restrictions. 100 shareholder limit. No non-individual and no non-resident alien shareholders.
Management Managed by director(s) and officer(s). Two Management Types
- Managed by Manager
- Managed by Members
Managed by director(s) and officer(s).
Allocations of Ownership None. Dividends must be paid based upon stock ownership. Permitted if the allocations have substantial economic effect. None. Income, gain, and loss pass-through to the shareholders based on the percentage of shares owned.
Liability Protection There is limited liability for shareholders, officers and directors. There is limited liability for members and managers (if applicable) There is limited liability for shareholders, officers and directors.
Duration Perpetual Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue. Perpetual
Transfer of Ownership Shares freely transferred. There may be restrictions under certain state laws. Shares can be transferred only to eligible S-corporation shareholders

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