Reference - Nails. Mona and her friends Jack and Bobby, all U.S. citizens, want to open a nail salon in Tennessee. They would all like to avoid personal liability for debts of the business and for wrongful acts of each other. They would also like to avoid taxation as much as possible. Mona is in favor of a corporation and asks if there is any problem with that form of business. Jack and Bobby say that they want to receive profit distributions and that they are concerned about excessive taxation with a corporation. Jack and Bobby urged the formation of a partnership even in the face of personal liability. Mona did some research and suggested an S corporation to Jack and Bobby. Would the proposed business qualify as an S corporation if it is incorporated in Delaware?

Question

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To be classified as an S corporation, a corporation may not have more than 100 shareholders; only individuals, trusts, and (in certain circumstances) corporations can be shareholders (partnerships cannot be shareholders); only one class of shares may be issued, although not all shares must have identical voting rights; it must be a domestic corporation; and no shareholder may be a nonresident alien.