| What are the problems with having a 501 (c) (3) Organization owning shares in an S Corporation?
Well, there are problems of an S Corporation owning shares of an S Corporation. The main problem is the S Corporation may at some point earn a profit and these profits will flow thru to its individual shareholders who in this case may be 501 (c) (3) Charitable organization.
These profits that flow thru to the Charity owning the S Corporation Shares, will trigger what is known as Unrelated Business Taxable Income (UBTI). This in turn will cause the charitiy to be subject to paying taxes.
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