An S corporation can only have one class of stock. If it violates this requirement, it may cause the corporation to lose its eligibility to be an S corporation.
An S corporation is treated as having only one class of stock if all of the outstanding shares of stock confer identical rights to distribution and liquidation proceeds. Distributions must be proportionate to stock ownership. Disproportionate distributions will create a second class of stock. Differences in voting rights among shares of common stock do not cause the S corporation to lose its eligibility.
If the S corporation requirements do not meet your business ownership needs, consider an LLC instead of the S corporation. The LLC allows for more flexibility by using special allocations of the flow-through tax profits and losses.
Contact us if you need help deciding if you can meet the one class of stock requirement or want to look at the option of doing business as an LLC.