Overview of S-Corporations
An S-Corporation (S-Corp) provides limited liability protection to shareholders. The key feature of an S-Corp is pass-through taxation, avoiding double taxation. S-Corps restrict shareholders and must adhere to IRS regulations.
Eligibility of S Corp Shareholders
An S Corporation can have 100 or fewer shareholders as individuals, trusts, or estates. Corporate entities or partnerships typically cannot be shareholders. The tax classification of an LLC owned by an S-Corp impacts its status.
Who Can Be an Owner of an S Corp?
S corps can be owned by any U.S. citizen or resident, with a maximum cap of 100 individuals. Trusts, LLCs, partnerships, C corps, and S corps cannot own an S corp. Rules around trust ownership can be complex.
Foreigners owning an S-corp is possible, but there are limitations. Non-resident aliens are ineligible, and all owners must be US citizens or residents.
Requirements for S Corp Shareholders
S corp shareholders must be individuals, certain trusts, estates, or 501(c)(3) organizations. Partnerships, corporations, and nonresident aliens don’t qualify.
Tax Status Considerations
Your owner or employee status depends on the business. Sole proprietors own, LLC members usually own. Partnership and corporate owners aren’t employees.