Form 1120, Schedule K, Question 4B

[AJain393]

Sorry, I am starting a new thread on a question that has been posted earlier. Below is a link for the old thread

Question on the form: Did any individual or estate own directly 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of the corporation’s stock entitled to vote? If “Yes,” complete Part II of Schedule G.

Situation: A C-Corp was founded in 2020. 80% of total common stock were issued to a solo founder and 20% were kept authorized. There was no revenue and no dividend distribution for the short tax year of 2020.

Question: Does the common stock carry voting rights or in other words, does Schedule G need to be filed?

Old thread: https://ttlc.intuit.com/community/business-taxes/discussion/form-1120-schedule-k-question-4b-startup...

[DaveF1006 · Accepted solution]

It depends. According to this IRS publication, "Schedule G (Form 1120) is used to provide information applicable to certain entities, individuals, and estates that own, directly, 20% or more, or own, directly or indirectly, 50% or more of the total voting power of all classes of a corporation's stock entitled to vote."

Normally in a corporation or S-Corp, common stock does carry voting rights unless but the nature of the rights and the specific issues shareholders are entitled to vote on can vary considerably from one company to another. You may check your S-Corp By-Laws for more information.

[Mike9241 · Accepted solution]

it would be impossible for a US corporation to not have any voting shares. the reason is that

Voting shares are shares that give the stockholder the right to vote on matters of corporate policymaking. Owning voting shares also allows a vote on who should be on the company’s board of directors. The BOD elects the officers.

so no voting shares no policy decisions could be made, this would include making the s corp election since there could be no officer to sign the election. no board of directors could be elected (usually required by state law) even if there is only one person and no officers which a corporation must have based on state law.

that doesn't mean an s-corp can't have non-voting stock only that there must be voting stock. 

[AJain393]

Thank you both @DaveF1006 and @Mike9241 . The corp in question is C corp. But, I am confident that your responses apply to both C corps and S corps. Thank you again.