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The Corporation > S-Corporations - Pg. 24

First Steps To qualify for a 50 percent reduction in the capital gains tax due upon sale of your QSB stock, the stock must meet all of the following criteria: 1. 2. 3. 4. 5. The corporation must be a domestic "C" corporation. The stock must have been issued after August 11, 1993. The stockholder must have received the stock as an original issue. The aggregate gross assets of the corporation must not have exceeded $50,000,000 at the time of and immediately after the issuance of the stock. At least 80 percent of the assets, by value, of the corporation must have been used in active trade or business. 24 S-Corporations S-corporations are most appropriate for businesses that: · Are closely held . An S-corporation can have no more than 75 shareholders. · Will not have any corporate or international investors . · Will generate initial losses that shareholders can use against their taxable income . · Plan to distribute most profits immediately to shareholders . A company that reinvests most of its profits can minimize its corporate-level income tax. If the shareholders intention is to take profits out of the company as cash instead of reinvesting them to grow the company, then they will prefer a pass-through entity that does not have a corporate level income tax. · Will not offer preferentially priced options to attract employees . An S-corporation can have only one class of stock, meaning that employees will have to pay the same price for shares as outside investors. · Will not be able to distribute a significant amount of corporate income to shareholders by means