Taxpayer is currently the only employee (but not a shareholder) of a
C-corporation. Her tax advisor is suggesting that she use an S-
corporation to limit her withholding/self-employment tax.
However for reasons too boring to go into here, she can't work for
another corporation, and can't use another corporation for this
My question is, if the corporation switches to an S-corporation, can
this non-shareholder employee receive compensation that is part
subject to withholding and part not, as shareholders are allowed to
do? Does she have to be a shareholder? Do the distributions not
subject to withholding have to be proportionate to the shareholder's
equity interests?
One possible solution would be for her to just buy out the people who
are shareholders. At this point I don't know if they will go for
that, however.
Any ideas or suggestions?
Reply to
Stuart O. Bronstein
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