Here is a situation I have come across several times in the last few years.
Falling In Love
The owner of a business decides to get married. A year later, the owner gets hit with a huge tax liability from the IRS. Why?
This particular owner decided to have his corporation taxed as an “S” corporation (as do most corporations). One of the requirements to qualify as a S corporation is that it has “no nonresident alien shareholders.” This client married a legal permanent resident that was not a US citizen.
Fools Rush In
When the couple said “I do,” this effectively made the wife a “nonresident alien shareholder” (since the state in which they were married is a community property state, this made the shares in the corporation property of both the husband and wife). Accordingly, the IRS stripped the corporation of it’s S election which for this owner meant an unforeseen and tremendous tax obligation. Love can sometimes hurt!
All this could have been avoided by filing with the county clerk a simple agreement signed by the future husband and wife that future wife waives all ownership interest in the corporation. The object lesson is always speak to your professionals before taking any major action.