S Corporation With Two Shareholders In Washington
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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).
A company may issue different types (also known as “classes”) of shares. These can include: Ordinary Shares.
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.
An S corporation can have only one class of stock, although it can have both voting and non-voting shares. Therefore, there can't be different classes of investors who are entitled to different dividends or distribution rights. Also, there cannot be more than 100 shareholders.
Unlike sole proprietorships, a corporation can be owned by multiple people.
LLCs can have an unlimited number of members; S corps can have no more than 100 shareholders (owners).
While the vast majority of U.S. public companies (approximately nine in 10) have a single class of voting stock, in recent years, a growing proportion of U.S. companies going public have multiple classes of common stock with differential voting rights.
In Washington, an S corporation is treated as a regular C corporation for state tax purposes because the state does not recognize the federal S corporation election.
How to Start an S-Corp in Washington Step 1 – Choose a Name. Step 2 – Appoint a registered agent. Step 3 – File a Washington Certificate of Formation. Step 4 – Create an operating agreement. Step 5 – Apply for an EIN. Step 6 – Apply for S Corp status with IRS Form 2553.
