One Class of Stock

An S corporation can generally only have one class of stock. Differences in the rights of shares permitted are very limited, e.g., some shares can be voting and others not. However, the return, distributions, and general economic rights of every share must be identical. Absent liberalization of these rules, an LLC that is taxed as a partnership, has substantial advantages over an S corporation in that the Members are permitted great latitude in allocating income, profits, deductions, and so forth. The allocations must, however, meet the requirement of having Substantial Economic Effect. Ask your estate planner about QSST and ESBT.