Form with which a corporation may resolve to alter its corporate status top that of a subchapter (S) corporation.
S Corporation With One Shareholder In Utah
State:
Multi-State
Control #:
US-0046-CR
Format:
Word;
Rich Text
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FAQ
Most management actions are protected from judicial scrutiny by the business judgement rule: absent bad faith, fraud, or breach of a fiduciary duty, the judgement of the managers of a corporation is conclusive.
"The business judgment rule is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.
The owners of a corporation are shareholders (also known as stockholders) who obtain interest in the business by purchasing shares of stock. Shareholders elect a board of directors, who are responsible for managing the corporation.
An S corporation is not subject to Utah income tax. However, shareholders are liable for Utah income tax in their separate or individual capacities.
One class of stock An S corporation may issue only one type of stock. A corporation will not be treated as having more than one class of stock purely because there is some discrepancy in the voting rights among the shares of the common stock.
It's a principle of corporate law that protects board directors and other corporate leaders from legal liability or “frivolous lawsuits” should their actions negatively impact a corporate stakeholder. But remember, they need to have acted ing to their fiduciary duty, in the shareholders' best interests.
Business Judgment Rule Where a director's decision is a reasonable one in light of all the circumstances about which the director knew or ought to have known, courts will not interfere with that decision.
IRS Requirements for an S Corp It must have only one class of stock. There can be no more than 100 shareholders. Shareholders must meet certain eligibility requirements, that is, they must be individuals, specific trusts and estates, or certain tax-exempt organizations 501(c)(3).
Classes of shares If there is only one class of shares, those shares must, as a minimum, have: the right to vote. the right to receive dividends (if the board of directors has declared any) the right to receive the remaining property of the corporation after it is dissolved.
With certain exceptions, a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds. The regulations then elaborate on how to analyze if there are identical distribution and liquidation rights.
