An S corporation can only have 1 class of stock, and all shareholders must have the same rights to distributions and liquidation proceeds. Therefore, Mr. and Mrs. B would not be able to issue nonvoting common stock to their children without terminating Beta's subchapter S election.

In order to shift corporate income to their children without terminating the subchapter S election, Mr. and Mrs. B may consider restructuring the company to become a C corporation or creating a separate limited liability company for their children, which Beta could then lease assets to.

Do you think you should always have an attorney involved with these decisions?  Why or why not? 

Answer rating: 100% (QA)

Whether or not to involve an attorney in decisions related to restructuring a corporation or creating separate entities for tax purposes depends on va... View the full answer