Discussion:CA S-Corp; Why should shareholder be an Officer?
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Discussion Forum Index --> Tax Questions --> CA S-Corp; Why should shareholder be an Officer?
| 28 December 2007 | |
| In a CA S-Corp there needs to be at least one Officer and one Director.
If an S-Corp has 2 shareholders are there any Tax advantages (or requirements) to add both as Officers (and/or Directors)? In the current case, the S-Corp is running a loss. Even if one of the shareholder is not an officer (and does not draw salary because of the losses), he should still be able to deduct the losses since he is actively participating. Being an officer limits some deductions and also increases the liability for the individual. Thus, it does not appear to be any advantages to add the second shareholder as an officer (and/or Director)? Am I missing something maybe? | |
| 29 December 2007 | |
| No tax reason I can think of; it's really a legal question. If SH #2 is not a director, his/her ability to participate in the management of the business may be limited. If SH #2 actively participates, he or she presumably is performing at least some services for the corporation, so would have to be treated as an employee if and when the corporation makes money.
Also, if the shareholder has check signing authority he or she may be exposed to personal liability regardless of status as an officer or director. I'd advise SH #2 to consult legal counsel independent from the corporation's counsel, just to be sure his or her own interests are protected. | |
Michaelstar (talk|edits) said: | 29 December 2007 |
| Viking - also, just because the S-Corp is generating losses does not always imply the shareholder is able to deduct those losses. The shareholder must have basis in the S-Corp or any allocated losses to the shareholder are suspended. There are many posts on this subject for you to "search" in the box on the left and read. | |
