In a trio of private letter rulings released on April 18, 2008, the IRS concluded that S corporation stock can be owned by a single-member LLC (SMLLC) so long as (1) the SMLLC did not elect to be treated as a corporation and (2) the single member of the LLC could own the stock directly without causing the S corporation to lose its S status.
The fact pattern in these rulings involved existing single shareholder S corporations. The shareholder proposed to transfer his/her shares in the S corporation to a SMLLC. In essence the LLCs were treated as disregarded entities and the shareholder continued to be considered the shareholder of the S corporations. See PLRs 200816002, 200816003, and 200816004 (January 14, 2008; released April 18, 2008).
-Marc Ward
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