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S corporation election

To elect S corporation status, all of the shareholders must consent to the election. This is very different from most decisions that a corporation may make. After all, most decisions (including the decision to revoke S corporation status and go back to being to being a C corporation) require only a simple majority of shareholders.

Why do we require all shareholders to consent to the S-corporation election before it is effective? Does this make sense? Why or why not?

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S Corporation:

S Corporation is a process in the organizations that requires its members to vote for the firm's income, losses and deductions entitled to its shareholders. This is done for the federal tax purposes. The main reason for S Corporation in an organization is so as to avoid the income of the company from being taxed twice. Shareholders in this case report for the cash flow through accounting for the income and losses imposed on their personal tax and returns. In addition to this, the individual tax imposed on the income tax rate is also assessed (S Corporations, 2010).

The reason why an organization will require all shareholders to consent to the ...

Solution Summary

S corporation election status are examined. A required shareholders to consent to the s-corporation election before it is effective.