Subchapter S Elections
The Subchapter S election, which shifts the corporate tax burden to the company’s shareholders and eliminates the personal dividend tax liability, can result in tax savings of 15 to 20% for most institutions. With over one third of the country’s banks currently operating as Sub-S entities, the competitive disadvantage of retaining a C-Corp structure is becoming material. Recent changes in Sub-S qualification rules have opened the door for more conversions. In most cases, an involuntary stock repurchase is necessary to reduce the company’s shareholder count to qualify for the S election. Because this forced transaction can raise shareholder concerns about management’s intentions, an independent valuation developed specifically for the involuntary repurchase is critical. National Capital can guide your board through the process, providing insight into the overall structuring of the transaction and helping the board address its fiduciary duties.