Question

Which of the following is true of an S corporation?

A) It can have no more than 100 shareholders.
B) Only a foreign corporation can become an S corporation.
C) It is taxed at the corporate level.
D) It must be a member of an affiliated group of corporations.

Answer 1

An S corporation can have no more than 100 shareholders.

Step-by-step explanation:

An S corporation is a type of corporation that has elected to pass its corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes. The correct answer is A) It can have no more than 100 shareholders.

One of the requirements for a corporation to be treated as an S corporation is that it must have no more than 100 shareholders. This allows S corporations to have the benefit of limited liability, like a regular corporation, while still maintaining the tax advantages of a partnership or sole proprietorship.