to 1997, an S corporation could not have subsidiaries, and could not be a member of an affiliated group of corporations. Since 1997, an S corporation can hold qualifying wholly owned subsidiaries and can own 80 percent or more of the stock of a C corporation. The C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations. But the S corporation cannot S Corporation is an elective provision that permits small business corporations and their shareholders to elect special income tax treatment. To become S Corporation or Small Business Corporation, the IRS has several special requirements.

The corporation must timely file IRS Form 2553 with the IRS. This election must be made by March 15 of the current year, if the corporation is a calendar-year taxpayer. The election will then take effect for the current tax year. A new corporation must make the S election within 75 days of formation; otherwise, it will be a C corporation for the first year and an S corporation thereafter.

The S corporation must not have more than 75 shareholders. Before 1997, the limit was 35. A married couple is counted as one shareholder. The shareholders of an S corporation must be individuals, certain estates or trusts. All stockholders must consent to the S corporation structure formation. Each shareholder must be a citizen or resident of the United States. The S corporation can have only one class of stock. However, voting and nonvoting shares are not considered to be two separate classes. Preferred stock is not allowed. Debt is not considered a second class of stock unless it is classified as equity. There are 3 requirements for debt to be acceptable for subchapter S election - its interest is not tied to profits, the debt is not convertible and the creditor must be an individual.

The S corporation must be a domestic corporation. That is, a corporation organized under the laws of the United States, a state, or territory that is taxed as a corporation under local law. Prior to 1997, an S corporation could not have subsidiaries, and could not be a member of an affiliated group of corporations. Since 1997, an S corporation can hold qualifying wholly owned subsidiaries and can own 80 percent or more of the stock of a C corporation. The C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations. But the S corporation cannot

r. The election will then take effect for the current tax year. A new corporation must make the S election within 75 days of formation; otherwise, it will be a C corporation for the first year and an S corporation thereafter.

The S corporation must not have more than 75 shareholders. Before 1997, the limit was 35. A married couple is counted as one shareholder. The shareholders of an S corporation must be individuals, certain estates or trusts. All stockholders must consent to the S corporation structure formation. Each shareholder must be a citizen or resident of the United States. The S corporation can have only one class of stock. However, voting and nonvoting shares are not considered to be two separate classes. Preferred stock is not allowed. Debt is not considered a second class of stock unless it is classified as equity. There are 3 requirements for debt to be acceptable for subchapter S election - its interest is not tied to profits, the debt is not convertible and the creditor must be an individual.

The S corporation must be a domestic corporation. That is, a corporation organized under the laws of the United States, a state, or territory that is taxed as a corporation under local law. Prior to 1997, an S corporation could not have subsidiaries, and could not be a member of an affiliated group of corporations. Since 1997, an S corporation can hold qualifying wholly owned subsidiaries and can own 80 percent or more of the stock of a C corporation. The C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations. But the S corporation cannot

be individuals, certain estates or trusts. All stockholders must consent to the S corporation structure formation. Each shareholder must be a citizen or resident of the United States. The S corporation can have only one class of stock. However, voting and nonvoting shares are not considered to be two separate classes. Preferred stock is not allowed. Debt is not considered a second class of stock unless it is classified as equity. There are 3 requirements for debt to be acceptable for subchapter S election - its interest is not tied to profits, the debt is not convertible and the creditor must be an individual.

The S corporation must be a domestic corporation. That is, a corporation organized under the laws of the United States, a state, or territory that is taxed as a corporation under local law. Prior to 1997, an S corporation could not have subsidiaries, and could not be a member of an affiliated group of corporations. Since 1997, an S corporation can hold qualifying wholly owned subsidiaries and can own 80 percent or more of the stock of a C corporation. The C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations. But the S corporation cannot

s classified as equity. There are 3 requirements for debt to be acceptable for subchapter S election - its interest is not tied to profits, the debt is not convertible and the creditor must be an individual.

The S corporation must be a domestic corporation. That is, a corporation organized under the laws of the United States, a state, or territory that is taxed as a corporation under local law. Prior to 1997, an S corporation could not have subsidiaries, and could not be a member of an affiliated group of corporations. Since 1997, an S corporation can hold qualifying wholly owned subsidiaries and can own 80 percent or more of the stock of a C corporation. The C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations. But the S corporation cannot

to 1997, an S corporation could not have subsidiaries, and could not be a member of an affiliated group of corporations. Since 1997, an S corporation can hold qualifying wholly owned subsidiaries and can own 80 percent or more of the stock of a C corporation. The C corporation subsidiary can elect to join in the filing of a consolidated return with its affiliated C corporations. But the S corporation cannot join in the election. The corporation must use the calendar year as its fiscal year unless it can demonstrate to the IRS that another fiscal year satisfies a business purpose.