My S-Corp didn't have an options pool when we first set it up. I'm now thinking of creating one (15% of total) to fix that as a talent incentive mechanism. My accountant said that C-Corps have no limitations on the creation of options pools, but wasn't sure if the same freedom is extended to S-Corps too. She is researching that in the background.
So, are S-Corps allowed to have an options pool? If you've set it up, I'd really appreciate your experiences with this!
IANAL / IANAA
I think you'll end up finding that you cannot do this (easily) with an S Corp.
S Corp's can have only one class of stock, and options and warrants are usually considered as a secondary or tertiary stock class in a typical C Corp.
IMO, S Corp's are fine when you have a small group of people (also, S Corps cannot have more than 100 share holders) that you just want to have basic ownership rights in the corporation with equal participation/voting rights (not meaning equal stock allocations, just that all shares have equal powers/rights proportionately).
In the typical scenario when you are issuing options to employees, you will have preferred (voting) shares and common (non-voting) shares.
S Corps also require that all shareholders be US citizens or legal aliens, not sure if that matters in your case or not.