Legal Question in Business Law in California

Yes, you can also be an employee of the corporation and issue yourself options.

What would be the point of issuing yourself options or of being an employee for that matter, other than to make an accounting exercise? The whole point of an s corp. is to be able to operate the company finances and taxes as a sole proprietorship or small partnership, while having the liability insulation of a corporation. It is completely counter productive to become an employee and pay all the employers side employment taxes, and then pay yourself as an employee and have withholding and employee taxes withheld, when you are going to be imputed the profits of the corporation as if you were a sole proprietor anyway?

Also, as sole owner of the s corp. you can issue yourself stock whenever you want, and make capital contributions whenever you want. So what possible purpose would be served by issuing stock options and then exercising the options by paying money into the corporation and issuing yourself more stock? Just issue yourself stock when you want to issue yourself stock and make a capital contribution when the corporation needs a captital contribution.

I agree with Mr. McCormick. What is the point, since in essence, you already own all stock.