I got into an argument with a friend about the difference in S Corp vs. C Corp.

My position was that an S Corp can have one person own 60% of a business' stock and control voting rights; another person can own 40% of the stock & have no voting rights. In all other ways the stock is identical.

He argued what that it becomes a C Corp because the stock is different because of the voting rights. (ie Class A & Class B stock)

Who's right?

you are right

you can have different voting rights but the distribution has to be the same proportionally

LOL, we now have doctors giving legal advice. Next thing you know lawyers will come on to give medical advice. Cats and dogs living together!

KingofHazor said:

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LOL, we now have doctors giving legal advice. Next thing you know lawyers will come on to give medical advice. Cats and dogs living together!

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lol.. but I am a well read Doctor

S-corps are a tax structure and only a tax structure. The S stands for small business.

You pass through all earnings as taxable proportionate to ownership, whether or not cash actually moved. You also can't be owned by another corporation. You also can only have one class of stock. Voting rights do not necessarily mean a different class.

C-corps face tax on both earnings and any dividends declared, but are flexible on structure and ownership.

No need to argue, it's all there. https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations

https://www.law.cornell.edu/uscode/text/26/1361

https://www.law.cornell.edu/cfr/text/26/1.1361-1