I have a small international TV program distribution company based in LA. An investor outside the US wants to buy 80 % of my company. I am an S Corp. Can a foreign entiry take partial ownership of an S Corp? Do i sell them shares in the company?
The short answer is "no". A foreign entity cannot be a shareholder in an S Corp. If you choose to sell 80% of your company you will have to abandon you S election.
Selling 80% of your company is an opened Pandora's box of issues. I highly recommend that you consult a good corporate lawyer on what taking on a partner really can mean.
Randolph is correct, however, a foreign entity can own an interest in an LLC and LLC's have the same pass-through tax treatment as S Corps. Thus, depending on the circumstances, there might be a way to structure this transaction in a way that works for you tax-wise, but converting to an LLC could be problematic. Moreover, as Randolph points out, you need to understand fully the implications of giving up 80% of your company. The bottom line: find a good corporate attorney in LA.
