"The due diligence is simple: it is a start up. No employees, no contractors."

That's not true. An S Corp always has at least one employee. Whoever is doing the work of that business is the employee, even if that is a sole shareholder.

"It should have been a disregarded entity but they were switched to c corp as they were foreigners with no ssn."

"They" and "LLC" and plural, means there is more than one person? You realize how late everything is: https://www.irs.gov/forms-pubs/revoking-a-subchapter-s-election

"Now imagine I called IRS today."

Imagine? It appears that you actually did this.

"and they advised me to increase expenses so the company will be making losses"

I can't imagine the IRS advising someone to increase expense so there is a loss. If that's what you got out of the discussion, okay.