Overview of S Corporation Ownership Structures
An S corporation is structured to pass income, losses, deductions, and credits through to shareholders, avoiding double taxation. However, it has specific restrictions on ownership and subsidiary relationships.
Rules and Exceptions for S Corporation Ownership
- An S corporation cannot have partnerships, corporations, or non-resident alien shareholders.
- An exception exists for owning another S corporation as a Qualified Subchapter S Subsidiary (QSub).
Subsidiary Ownership under S Corporation
- Parent companies typically control subsidiaries by purchasing a majority of voting shares.
- Owning 100% of a subsidiary makes it a wholly owned subsidiary.
Tax Considerations and Business Structure
- S corporations can own LLCs, which offer ownership flexibility.
- An LLC cannot own an S corporation due to ownership restrictions.
Exploring Multiple Business Ownership
- Different ways to structure multiple businesses legally, including DBAs, separate entities, or holding company models.
Considerations for Multiple S Corporations
- Managing multiple accounting systems, tax returns, and payrolls with multiple S corporations.
- Using an S corporation to own an LLC can help limit liability for entrepreneurs.
Consult a Business Lawyer for Specific Concerns
If you have questions about S corporation ownership structures and related legal matters, it’s advisable to seek guidance from a business attorney.