Can a Trust Own an S Corp?

Yes, a trust may own a S corporation, to your question. One should be aware of some restrictions, though, before proceeding. A trust must be a qualified trust, which means it satisfies specific rules established by the IRS, in order for it to own a S corp. The trust must be a grantor trust, which means that it will be taxed along with the grantor’s estate. The trust may not have more than 100 shareholders and may only have one class of shares. Can a S corporation own another S corporation?

Unable to own another S corporation, a S corporation. S corporations can only be held by individuals, specific trusts, and estates, according to the IRS. So, in order to own another business company, a S corp must be set up as a C corporation or LLC. My S Corp Can Pay My Mortgage, Right? No, a S corporation cannot cover its stockholders’ personal expenses. By doing this, the IRS would reclassify the payment as a distribution, which is subject to a different set of tax rules than payments made to employees in the form of wages or salaries. Should I Add Myself to the Payroll? You should put yourself on payroll if you are the proprietor of a S corporation, yes. This is true because S businesses are obligated to provide its employees, including the owner, with fair compensation. If this is not done, the IRS may reclassify payouts as wages and assess fines. How Do S Corps Process Payroll?

The same payroll regulations that apply to all businesses also apply to S corporations. Obtaining an Employer Identification Number (EIN), setting up a payroll system, and deducting payroll taxes from employee paychecks are all included in this. S firms must also submit annual Form W-2s for all employees as well as quarterly payroll tax returns. To guarantee compliance with payroll laws and regulations, it is advised that S corporations work with a payroll provider or accountant.

In conclusion, even if a trust is permitted to own a S company, there are conditions that must be satisfied and restrictions to be aware of. S corporations are prohibited from owning other S corporations, are unable to cover shareholders’ personal expenses, and are required by the IRS to add owners to their payroll. Aside from getting an EIN, setting up a payroll system, and completing payroll tax reports, S businesses must also adhere to normal payroll practices.