Legal Question in Business Law in California

It doesn't matter if it is in California or Maine. Any corporation can own another corporation as a subsidiary. The terms "c corp" and "s corp" are really misnomers, in that they imply that there are two types of corporation. In fact there is only one type of corporation. What everyone calls an "s corp" is actually just a plain old "c corp" that has elected to be taxed as a sole proprietorship or partnership, and has qualified to do so under "Subchapter S" in the Internal Revenue Code. Therefore there is no reason for a "c corp" to own an "s corp." If you want to be taxed as a sole proprietorship, why set up a subsidiary at all? Just form a division of the parent. Or if the c corp parent is acquiring an s corp, just do a merger, or purchase of assets, instead of acquiring the stock of the s corp as a subsidiary. I suppose there MIGHT be some reason why a c corp would want to have an s corp subsidiary, but if so, it would have to be under some very complicated circumstances involving some very sophisticated corporate and financial structuring, in which case it is far beyond the scope of a free internet Q&A service.

No. All stockholders of an S corporation must be individuals, estates, exempt organizations described in Internal Revenue Code Sections 401(a) or 501(c)(3) or certain trusts described in Section 1361(c)(2)(A).

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