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About Transferring S-Corp Shares to a Trust in Florida

September 10, 2021 Business Entities and Transactions

The Internal Revenue Service defines an S-Corp as a “corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S-Corps report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S-Corps to avoid double taxation on the corporate income. S-Corps are responsible for tax on certain built-in gains and passive income at the entity level.”

S-Corp Restrictions Explained by an Experienced Florida and Palm Beach County Estate Planning Attorney

Each type of business entity has a different set of restrictions. One reason for these ownership restrictions is to ensure the income of a business is reported to the IRS each year. However, S-Corps do not directly pay taxes on their income. Instead, the individual owners of an S-Corp are required to report their pro rata share of the S-Corp’s income on their tax returns, which is commonly known as “pass-through” taxation. S-Corps cannot have more than 100 shareholders, and shareholders may only be individuals, certain trusts, estates. Partnerships, corporations, and non-resident individuals may not be shareholders. 

Can S-Corp Shares be Transferred To a Trust?

S-Corp shares can be transferred only to certain types of trusts. These trusts include:

  • Electing small business trusts (ESBT)
  • Grantor trusts
  • Qualified subchapter S trusts (QSST)

Furthermore, particular rules apply to trusts that hold stock or shares in an S-Corp. You can put your S-Corp into your living trust by simply transferring your shares ownership to yourself as trustee of your living trust, but again, there are certain procedures that must be strictly followed. The complexity of the regulations is why most business owners rely on the experience of a trusted Florida and Palm Beach County estate planning attorney to ensure compliance.

Contact a Comiter, Singer, Baseman & Braun for Help With Your S-Corp and Trust

Transferring your S-Corp into your living trust can be a strategic estate planning approach. However, everybody’s situation is unique and mistakes regarding the formalities may put your tax advantages in jeopardy. Let an experienced Florida and Palm Beach County estate planning attorney at Comiter, Singer, Baseman & Braun help you make sure the transfer is error-free.

At Comiter, Singer, Baseman & Braun, we understand the complex laws surrounding trusts in Florida, and also the laws involved in related areas of Florida law, such as asset protection planning, estate litigation, probate, tax planning, guardianship, mediation, and business entities and transactions.

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