If I want to incorporate an S-Corp and there are 3 partners, 2 of which are married to each other, can we have 3 shareholders with equal voting rights?

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If I want to incorporate an S-Corp and there are 3 partners, 2 of which are married to each other, can we have 3 shareholders with equal voting rights?

Asked on May 18, 2015 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

As a general matter, you can have three shareholders (including some of whom who are married to others) with equal voting rights. However, voting in corporations is determined by stock ownership, and stock ownership is determined generally by monetary compensation--typically, to have equal voting, you'd each put of 1/3 the investment. There are ways around that (such as with valuing "in-kind" contributions--i.e. property contributed in lieu of cash) or different classes of stock--but an easier way to have equal voting power if there unequal cash investments is to set up the business as an LLC, not a sub-S corp.; LLC's have more flexibility in how you structure them then corporations.


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