Definition of Treasury Stock:
Shares of stock of a corporation which were issued and later re-acquired by the corporation. This can occur several ways, including by repurchase by the company or if the shares were subject to vesting (i.e. risk of forfeiture) and the vesting conditions were not satisfied, which results in a forfeiture of the shares back to the company. Treasury stock is considered “issued, but not outstanding.”
Definition of Subsidiary:
A corporation or LLC that is either wholly owned or majority owned by another corporation or business entity.
Definition of Stockholder:
A “stockholder” is an owner of shares of stock of a corporation.
Definition of Stock Certificate:
A certificate which evidences ownership of shares of stock of a corporation.
Definition of Stock:
An equity or ownership interest in a corporation.
Definition of Statutory Agent:
See “Registered Agent”.
Definition of Shareholder:
See “Stockholder”.
Definition of Share:
Equity of a corporation is called “stock” and stock is denominated in “shares”.
Definition of S Corporation:
An S Corporation is a corporation whose stockholders make an election with the Internal Revenue Code to be taxed as a partnership.
S Corporations receive many of the same benefits of a corporation (i.e., limited liability of stockholders), while at the same time enjoying the tax benefits of a partnership.
S Corporations are tax “filers”, but generally not tax “payers” (other than in limited circumstances). Any taxes on profits are paid at the stockholder level only, and not at the corporate level.
A corporation may make an S Corporation election if:
- The corporation is incorporated in the United States.
- The corporation has only one class of stock.
- The corporation has less than 100 stockholders.
- All stockholders of the corporation are U.S. citizens or residents, and must be natural persons (and not entities).
- Profits and losses of the corporation must be allocated to stockholders pro rata based on each stockholder’s ownership interest in the corporation.
If a corporation satisfies the above requirements, then all stockholders of the corporation may complete, sign and file IRS Form 2553.
A few states (New York and New Jersey) require a separate state-level S election in order for the corporation to be treated for state tax purposes as an S corporation.
