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Can an LLC invest in an s corp?

Can an LLC invest in an s corp?
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Answered in 1 minute by:
9/27/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,888
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D. :

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.

Robin D. :

Only the following entities may be shareholders: individuals, estates, certain trusts, certain partnerships, tax-exempt charitable organizations, and other S corporations (but only if the other S corporation is the sole shareholder).


Robin D. :

So an LLC could potentially be a memeber

Robin D. :

member*

Customer:

The LLC in question is a partnership and not a charitiable 501c entity.

Robin D. :

The IRS has permitted a single-member LLC to be an S corporation shareholder. The logic is that the single-member LLC is disregarded for federal tax purposes. Reg. §(NNN) NNN-NNNN2(a). The tax information of the LLC is reported on the sole owner's personal income tax return, just as was the case when the individual personally owned the stock. In the ruling, an individual transferred his S corporation stock as well as other property to a single-member LLC, where the shareholder was the sole owner of the LLC.
Let me check a little further please on the partnership. What type of partnership?

Robin D. :

No unfortunately this IRS page states that specifically

Robin D. :

To qualify for S corporation status, the corporation must meet the following requirements:



  • child">
    Be a domestic corporation



  • Have only allowable shareholders



    • including individuals, certain trust, and estates and



    • may not include partnerships, corporations or non-resident alien shareholders





  • Have no more than 100 shareholders



  • Have one class of stock



  • Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.


Robin D. :

An LLC could potentially be a shareholder, if the LLC is a partnership then no.

Robin D. :

I hope this CHAT was useful.

Robin D. :

My goal is to give you excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic request me again.

Robin D.
Robin D., Senior Tax Advisor 4
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