Why do we prevent nonresident alien shareholders from owning stock in S corporations? What might happen if they were allowed to own stock in such a corporation? What happens if a nonresident alien becomes a shareholder?
Shareholders that implement businesses as S Corps are expected to follow certain guidelines that the federal government expects these corporations to follow and that gives shareholders tax benefits that are not given to every individual or company owner, unless the corporation is setup under these guidelines. "In order for a corporation to qualify for special tax treatment under Subchapter S of the Internal Revenue Code (IRC), it must comply with certain restrictions on the ownership, type and transferability of its stock. When the S corporation election is made, the shareholders attest, under penalties of perjury, that the corporation's ownership and structure comply with IRC regulations" (Masters, 2010). The government requires all citizens of the US to pay his or her fair share of taxes, and since nonresident aliens usually don't pay taxes in the US this would be one of the main reasons why owning stocks in S Corps ...
The expert determines why we prevent nonresident alien shareholders from owner stocks.