You must elect to be an FSC. 2. The FSC can have no more than 25 shareholders nor preferred stock. It can have several classes of stock. Having passed these other ministerial requirements, it is important to understand how the substantive benefits work. Some terminology becomes important.
Income is either exempt foreign trade income or non-exempt foreign trade income.
First, what is foreign trade income. This is the easy part. This depends on the pricing rule used to determine the amount of foreign income the FSC earns. Pricing rules are not going to be covered in this article except to say the following. Pricing rules come into play when a corporation buys and sells between its subsidiaries.