An S corp can be owned by any U.S. citizen or U.S. resident. The law caps the maximum number of owners at 100. Individuals can own an S corp. Trusts, LLCs, partnerships, C corporations, and S corporations cannot own an S corp. A shareholder can sell his share without getting the consent of other members.
Special Ownership Conditions
The only exception that allows an S corp to own another S corp is when one is a qualified subchapter S subsidiary. The original business can own the new business as an S corp if it owns all of the shares. The IRS has taken the position that a single-member LLC that is completely owned by an eligible S corporation shareholder, can itself be an eligible shareholder of an S corporation.
An S Corporation, or S Corp, is designed to avoid the double taxation that typically occurs with traditional C Corporations. In an S Corp, profits and some losses are passed directly to the owners’ personal income without being subject to corporate tax rates.
C Corp vs. S Corp Ownership
However, an S Corp can own a C Corp.
Owners of a corporation are called shareholders. An S corporation can only have one class of stock.
Maintaining S Corporation Status
To become an S corporation, the corporation must submit Form 2553 signed by all shareholders.
The benefits of an S corporation include lower taxes for owners.
An S corp is a corporation that fulfills specific criteria to be free from paying corporate tax. S corps must follow detailed rules to maintain that status, including having fewer than 100 shareholders and only having shareholders who are U.S. citizens or legal residents.
If you need help knowing if an S corp can own another S corp, you can consult a business lawyer.
An S Corporation can own up to 100 percent of an LLC. Using this business form can guide you through the process of setting up this structure.