Can an “S” Corporation Have Different Kinds of Stock?

Yes and No.  The Internal Revenue Code sets forth the requirements that a corporation must meet in order to qualify as an “S” corporation.  One of these requirements is that the corporation may have only one class of stock.  Voting and non-voting common stock are treated as part of a single class of stock.  But common stock and preferred stock are treated as separate classes of stock.  Likewise, debt convertible into stock is treated as a separate class of stock.  In making the determination whether different securities are part of the same or different classes, the IRS focuses on whether the securities have different rights to share in distributions and liquidation proceeds.  If the IRS finds that a corporation has more than a single class of stock, the corporation will lose its status as an “S” corporation, and the corporation will be treated as a regular “C” corporation. 

If you would like to know more about how to set-up an “S” corporation, or how “S” corporations and “C” corporations are treated for tax purposes, let me know.  Jsenney@pselaw.com or 937-223-1130.

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AND ONE MORE THING.  A friend sent me a link to an online site offering discount legal services from “top professionals.”  I checked it out.  Don’t waste your time.  It is one thing to buy a shirt or golf clubs online.  It is quite another to try to get advice on how to deal with real legal issues.   It is a safe bet that F. Lee Bailey is not answering the phone or the email at these sites.  In any event, whoever answers your inquiry doesn’t know you or your family or your business, and simply can’t give you the kind of personal care, understanding, assistance and advice you need and deserve.  If you want to speak to someone who cares, give me a call.  Jsenney@pselaw.com or 937-223-1130.

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