Operating losses are taxed once as if realized by the shareholders. Despite the tax advantages, the S Corporation has limitations on the number and type of shareholders. The Company may not have more than 75 shareholders and may only issue common stock. And, as mentioned above, non-resident aliens can not be shareholders. These limitations on shareholders mean that the S Corporation is an imperfect vehicle for public offerings.
Taxes pass through to the principals and the company's earnings are only taxed on one level.
The L.L.C. may make a lot of sense at start up, but because it is taxed like a partnership, it is not suitable for a public offering. In addition, there are tax disincentives that discourage the use of stock options as a method of compensating employees. This, of course, is a very brief rundown of the different form of corporate organization. They all have effects on immigration in addition to the issues discussed above. The Author Andr s Benach is an Associate in the Law Offices of Cyrus D. Mehta.