Today TaxMama hears from Jim in Marion, Illinois, who says. “I would like to know if it is legal for an “LLC” to be an investor in an “S” corporation?”
Hi James
Here’s what IRS says about who may own shares in an S Corporation. The information can be found in the instructions to Form 2553 – the Election by a Small Business Corporation
https://www.irs.gov/pub/irs-pdf/i2553.pdf :
1.The company has no more than 100 shareholders. (A husband and wife and their estates are treated as one shareholder for this test. A member of a family can choose to treat all members of the family as one shareholder for this test. All other persons are treated as separate shareholders.)
2.The only shareholders are individuals, estates, certain exempt organizations, or certain trusts.
3.The company has no nonresident alien shareholders. (That is, the only shareholders are US citizens and resident aliens.)
So, while an LLC may chose to file its tax returns as an S Corp, it may not own another S Corp.
Sorry.
You may want to pick up Wayne M. Davies’ Ultimate Small Business Tax Reduction Guide
https://hop.clickbank.net/?taxmama/taxguide . Not only will you learn how form and use S Corporations and other entities, it comes with 1 private telephone consultation with Wayne and 4 tax return review coupons. That’s a pretty good deal. Naturally, you’ll find excellent information to complement Wayne’s advice in Small Business Taxes Made Easy. https://www.taxmama.com/AskTaxMama/book/
And remember, you can find answers to questions about corporations and all kinds of other tax issues, free. Where? Where else? At TaxMama.com
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- Form 2553 Instructions :: Election by a Small Business Corporation
- Form 2553 :: Election by a Small Business Corporation
- Wayne M. Davies’ :: Ultimate Small Business Tax Reduction Guide
- TaxMama’s own book :: Small Business Taxes Made Easy
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