Which of the following is true about S corporations?

Which of the following is true about S corporations?

• A. 100 or less stockholders
• B. Unlimited stockholders
• C. Foreign ownership required
• D. All stockholders must be corporations

Answer: (A)

S corporations are structured to be small, pass-through entities with specific ownership limits. The true statement is that they can have 100 or fewer stockholders. This cap helps keep ownership tightly held and avoids the complexities of a large public company. Shareholders must be individuals who are U.S. citizens or resident aliens, or certain trusts and estates; generally, corporations or non-US owners aren’t eligible. So unlimited stockholders would violate the rule, foreign ownership isn’t a requirement (and is in fact restricted), and not all stockholders must be corporations.

S corporations are structured to be small, pass-through entities with specific ownership limits. The true statement is that they can have 100 or fewer stockholders. This cap helps keep ownership tightly held and avoids the complexities of a large public company. Shareholders must be individuals who are U.S. citizens or resident aliens, or certain trusts and estates; generally, corporations or non-US owners aren’t eligible. So unlimited stockholders would violate the rule, foreign ownership isn’t a requirement (and is in fact restricted), and not all stockholders must be corporations.