One criteria of S corps is they can only issue one class of stock. However, can S corp stock have different voting rights? As long as distribution and liquidation proceeds are not impacted, tax regulations [Regulation 1.1361-1]  permit S corps to issue both voting and non-voting stock. Voting stock is disregarded when it comes to the single class of stock requirement and the 100 shareholder limit. There is no limit to the number of voting shares that can be issued.

For instance:

• Voting Shares: Shareholders with voting rights can participate in corporate decisions, such as electing the board of directors. Voting shares do not receive an allocation of business profit or distributions.
• Non-Voting Shares: Shareholders with non-voting shares do not have a say in corporate decisions but still have economic rights. They have capital accounts and are eligible to receive distributions.

It’s important to ensure that the differences in voting rights do not affect the uniformity of distribution and liquidation rights. Otherwise, the S corp risks violating the single class of stock requirement and potentially losing its S corp status. If you are interested in setting up S corp voting shares, I recommend working with an attorney and experienced CPA to ensure compliance. If you need a referral to an attorney that can assist, I am happy to provide a couple of options. You can click here and I’ll provide a referral.