Choice of Entity Requirements
In order to become an S corporation in Georgia, an entity must first be a domestic corporation organized in Georgia. For S corporation purposes, "domestic corporation" includes joint-stock companies, insurance companies and associations. "Domestic corporation" does not include members of an affiliated group of corporations, current or former domestic international sales corporations, and insurance companies that are taxed under Subchapter L of the Internal Revenue Code.
A Georgia S corporation can have no more than 35 shareholders. Moreover, the shareholders are limited to individuals, estates, and trusts, excluding foreign trusts and trusts that qualify as an IRA. Because of the numerical limitation, the way shareholders are counted is extremely important. For purposes of determining the number of shareholders for an S corporation, a husband and wife and their estates are counted as one shareholder, even if they own stock separately.
Class of Stock Requirements
A Georgia entity that has more than one class of stock does not qualify as an S corporation. An entity has one class of stock if all outstanding shares of stock -- stocks held by investors, including restricted shares owned by company officers and insiders, as well as common shares held by the public -- give identical rights to distribution and liquidation proceeds. Note that differences in voting rights do not create additional classes of stock for S corporation purposes. Thus, if one stock includes voting rights and another stock does not, they will still be treated as one class of stock, assuming they confer identical rights to distribution and liquidation proceeds.
In order to elect S corporation status in Georgia, an eligible domestic corporation must fill out Form 2553 and mail or fax it to the Internal Revenue Service Center, Ogden, UT 84201. The fax number is (801) 620-7116. Note that the form must be filed before the sixteenth day of the third month of the tax year in order to take effect during that tax year.