Trusts with individuals as beneficiaries are permitted to own shares in an S corp. Estates of deceased individuals that owned shares in an S corp before death can maintain ownership of that stock through the probate process.The IRS prohibits any other type of corporation from owning shares of an S corp.
Second, if the tax law ignores the legal shareholder and says a US citizen or permanent resident for all intents and purposes owns shares, that arrangement also works.This little "simplifying assumption" explains why shareholders like single member LLCs, grantor trusts and some other trusts work okay as shareholders...The double taxation an S corp is designed to avoid is enforced by the IRS, according to "How To Start And Run Your Own Corporation: S-Corporations For Small Business Owners" by Peter I. Compliance with the Internal Revenue Code, and rules and procedures of the IRS, represent complex legal matters.Consider retaining the services of a qualified attorney versed in business organization and management issued.Back to list of frequently asked questions If you want additional information about how to maximize the tax savings related to running a business or investment venture, you may also be interested in one of our downloadable e-books (see descriptions below).
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Taxes are not assessed at the corporate level when an S corp election is made with the IRS.
The types of permissible shareholders in an S corp, as approved by the IRS, are individuals as well as certain trusts and estates.
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Therefore, you also aren't eligible as a shareholder if there are already 100 shareholders.