Travis: OK. So, if somebody had a partner that lived outside of the United States and they want to form an American entity, they're limited to an LLC or a C Corp? Is that correct?
Jake: Now, if they're a US citizen, they can go ahead and form the S Corporation, that's not the problem. It's not necessarily if they live outside the United States. It's if they're a permanent resident. Have they applied for their permanent resident, green card, with INS or are they a US citizen? So really citizenship requirements.
Travis: OK. So, that would limit them. Can an alien form an LLC?
Jake: Yes. With an LLC you don't have those restrictions.
Travis: OK, and what about a C Corp. Are those residency restrictions for S Corps, or is that for C Corps as well?
Jake: That's just for S Corps.
Travis: I wonder why they make that distinction between S Corp and a C Corp?
Jake: It's really about the tax advantages of having an S Corporation. In terms of it being pass–through. I think, you know, a C Corp and the taxes that apply to a C Corporation can be pretty prohibitive. So, I think the IRS and the individuals that wanted to be able to create a structure that would help small business owners really thought about creating that S Corporation.
Travis: Ok. That makes sense. Now, you mentioned a little earlier that S Corporations can have a maximum of 100 owners?
Jake: Yes. That only applies to S Corporation. It doesn't apply to C Corporations.