Outside investment into a S Corp

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  • #2887218
    NYSCPA
    Participant

    Facts:

    Client, A, is a multimember LLC taxed as a S Corp. Prospective investor, B, is a partnership/corporation/non allowable shareholder.

    Can B form a new llc, C, of which it is the sole owner, and then have C invest in A?

    Thank you for your responses.

    Side note, there should be a Forum topic for “practical application/ real life questions”.

    NYS Licensed CPA. 12yrs in this shit and it never gets easier!
    #2887254
    ReckedRecked
    Participant

    My gut feeling is no. Shareholders of an S-corp must be natural persons, which is the rule that disallows Corps and Partnerships.
    If you focus on the no corps and no partnerships rule, then an LLC seems the logical next step, but that does not meet the natural person test.

    Memento Mori - Kingston NY CPA & EA (SUNY Albany 2002)

    FAR-93 11/9/17 (10wks, 250 hrs, Roger 1800+ MCQs, Gleim TB 600+MCQs, SIMs)
    AUD-88 12/7/17 (3 wks, 85 hrs, Roger 1000 MCQs no SIMs hail mary)
    REG-96 1/18/18 (6 wks, 110 hrs, 1400 MCQs, no SIMs)
    BEC-91 2/16/18 (4wks, 90 hrs, 1240 MCQs)

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