No, this structure will not work. An S corporation is only permitted to have eligible shareholders, which include U.S. citizens, permanent residents, qualified subchapter S trusts, and certain types of estates, trusts and exempt organizations. S corporation shareholders cannot include C corporations, partnerships and other multiple member LLC's. If a C corporation owns S corporation stock through a single member LLC, the U.S. tax laws would disregard the single member LLC's ownership and consider the true owner of the S corporation to be the C corporation, and not the LLC.