I am at a start up and our company issued restricted stock to new investors/employees. I was told that the issuance was invalid because S-corps cannot have different classes of shares, and restricted stock is considered a different share class. Does this mean that that we will need to reissue the stock? Also, the people that were issued the restricted stock all filed 83b elections upon the stock issuance. Does this mean that the 83b election is invalid, as well?
USA Can restricted stock be issued in S Corp?
- Thread starter Kee
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Seems like it would be easier to just get rid of the S corporation designation. If you're issuing multiple classes of stock, etc, it sounds complicated enough for a normal C corp, that's what they're good at.
1. An S Corp can have only one class of stock OUTSTANDING.
2. Read the IRS regs which exclude restricted stock from outstanding stock.Reg 1.1361-1
3. Since folks ran out and made 83(b) elections, you now need a lawyer's guidance on the ramifications of that. Usually the exclusion ends.
Sounds like a really poorly coordinated stock issuance. Somebody should get fired.
2. Read the IRS regs which exclude restricted stock from outstanding stock.Reg 1.1361-1
3. Since folks ran out and made 83(b) elections, you now need a lawyer's guidance on the ramifications of that. Usually the exclusion ends.
Sounds like a really poorly coordinated stock issuance. Somebody should get fired.
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