Owning an S

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.


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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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