They can use an S corporation partnership. The partnership’s partners will include Olympia’s S corporation, Susan’s S Corporation and then Diane, the individual. Problem solved. Note: I’ve got a bit more discussion of who is and isn’t an eligible S corporation shareholder at the S corporations explained FAQ:

How many members can A S corporation have?

For example, a 100-member S corporation can legally form a partnership with a 70-member partnership. In such a business arrangement, the other partners in the partnership do not need to be U.S. citizens or U.S. residents. Which Entities Can Hold Stock in an S Corporation?

Can A S corporation sell shares to a major shareholder?

If the S corporation has a shareholders’ agreement in place, your sale of stock to a major shareholder must comply with any requirements specified in the agreement. Typically, the most complicated part of selling shares in an S corporation is determining the sales price.

What happens to the profits of a S corporation?

Each S corporation partner would then get a share of the profits. And then, within that S corporation, all of the profits and all of the distributions would go to the S corporation’s single shareholder. With a single shareholder S corporation, you would not even have the ability to treat shareholders differently.

What do you need to know about single member’s Corp?

If you choose S Corp status, you will need to file additional end of year tax forms, including Form 1120S, which is the S Corp income tax return. Both S Corporations and single-member LLCs can be taxed as pass-through entities. One of the biggest differences is that S Corps require considerably more paperwork.

What can independent contractors do with an S-Corp?

If the independent contractor is comfortable with an S-Corp and working along as the owner of the corporation, he or she can take advantage of an online presence to increase contract work. This may help the individual with work outside the standard contract and still have the opportunities given to different contractors.

How does profit sharing work in a S corporation?

You would do the profit sharing calculations at the partnership level. Each S corporation partner would then get a share of the profits. And then, within that S corporation, all of the profits and all of the distributions would go to the S corporation’s single shareholder.