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How Long Can an Estate be a Shareholder in an S-Corp?

September 20, 2021 Business Entities and Transactions

An S-Corp is a type of corporation that allows shareholders to enjoy the typical benefits of incorporation along with the benefits of “pass-through” taxation, which means that the corporation itself is not taxed, and shareholders are instead taxed at the personal income level. In other words, the shareholders are not essentially double-taxed like with a C-Corp where the corporation is taxed on its income and the shareholder is taxed on the dividends received by the corporation. In this way, an S-Corp is similar to an LLC.

S-Corp Restrictions 

The primary difference between various types of business entities is that they have different sets of restrictions. When selecting an entity type for a new business one of the most common questions we receive is “what’s the difference between an S-Corp and an LLC?” The answer can typically be found by comparing the restrictions of each type of entity, although tax considerations are also a primary factor. You should not select a business entity type without consulting a Florida and Palm Beach County asset protection attorney who is experienced with both business formation and tax issues, such as the Palm Beach County corporate and tax lawyers at Comiter, Singer, Baseman & Braun.

Can an Estate be a Shareholder in an S-Corp, and if So, For How Long?

Yes, the IRS allows the estate of a deceased shareholder to be an S-Corporation shareholder. Note the language “deceased shareholder.” This indicates, correctly, that an estate can “step in” and become an S-Corp shareholder when a typical shareholder dies.

An estate may be an S-Corp shareholder throughout the period of the estate’s existence, which lasts during the administration and settlement of the estate. The length of time for the administration and settlement is not specifically defined in the Internal Revenue Code, but it should not be inordinately prolonged. As is the case with many legal periods of time that are not expressly defined, the appropriate amount of time for the estate to meet its responsibilities and terminate will be dependent on the facts and circumstances of the estate at issue. In other words, this period of time should be “reasonable,” which is a familiar standard in the law.

Contact Comiter, Singer, Baseman & Braun for Help With Your S-Corp and Estate Issues

Being a shareholder in an S-Corp and the process for dealing with this issue during the estate administration and settlement is just one of many issues that may arise when an estate is being processed. Estate issues like the one discussed can be complicated and time-sensitive. Let an experienced Florida and Palm Beach County asset protection attorney at Comiter, Singer, Baseman & Braun help you make sure the estate is processed quickly and smoothly.

At Comiter, Singer, Baseman & Braun, we have experience in estate administration issues, tax issues, and other types of professional matters under Florida law, such as asset protection planning, estate litigation, trust administration, probate, guardianship, mediation, and business entities and transactions.

For help with any estate or tax issues in Florida, contact the Palm Beach County estate planning lawyers at Comiter, Singer, Baseman & Braun, either online or by calling us at 561-626-2101 or toll-free at 800-226-1484. We work with clients throughout the state of Florida, including Palm Beach County, Boca Raton, and Palm Beach Gardens.

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