Despite the prevalence of LLCs, S Corps remain a preferred choice of entity for many family-controlled and other closely-held businesses. They retain certain tax advantages over other pass-through entities and their corporate structure makes them familiar to investors, their legal counselors, and lenders.
Still, S Corps are "fragile" entities in the sense that the tradeoff for their tax and other benefits is that they must adhere to a several capital structure restrictions, which limit their flexibility. Drafting S Corp stockholders' agreements is a careful balance of maximizing tax benefits, preventing the loss of the preferred tax status through inadvertently disqualifying corporate actions, and maximizing organizational flexibility in other areas.
This program provides a real world guide to business planning with S Corps and drafting their underlying stockholder agreements.
Part topics include:
- Business planning with S Corps and drafting S stockholders' agreements
- Counseling clients on choice of entity considerations of S Corps v. LLCs/partnerships
- Capital structure issues – restrictions on types of debt and equity
- Who qualifies as an eligible S Corp stockholder
- Transferability of interests and restrictions to preserve S Corp status