Business

The numerous advantages of forming a California S Corporation continue to increase. The result of so many tax loopholes and other favorable treatments is once again making an S Corporation the entity of choice when starting a business in California. New laws continue to appear that give the shareholders of the company more reason to smile.

New Laws Concerning a California S Corporation
The recent Small Business Jobs Protection Act of 1997 brought more fame to this previous unknown entity. The most notable change concerned subsidiaries of California S Corporations. Under a prior law, an S Corporation incorporated in California could not own eighty percent of the stock of another corporation and could not have corporate shareholders.

This new law changed the ruling for tax years beginning after 1996. The law permitted California S Corporations to own eighty percent of the stock of C Corporations and to own qualified subchapter S subsidiaries. To qualify as a subsidiary, the subsidiary would have to be eligible to elect S treatment if all of its stock were owned directly by its parent California S Corporations shareholders.

The subsidiary must be owned one hundred percent by the parent S Corporation and the parent would have to elect to treat the subsidiary as a qualified subchapter S subsidiary. The point of this is to net the gains and losses of the companies. This law has the capabilities of saving your corporation millions of dollars.