Which of the following is a requirement for an S corporation?

Which of the following is a requirement for an S corporation?

• A. 100 or less stockholders
• B. US residency required
• C. Corporate stockholders only
• D. Nonindividual entities allowed

Answer: (A)

S corporation eligibility centers on who can own shares. The most fundamental requirement is that there are 100 or fewer stockholders. This cap keeps the entity small and is a defining condition of Subchapter S status. The rule is explicit and universal, so having 100 or fewer shareholders is the best one-line summary of who can own an S-corp. The other restrictions are real but more nuanced. Corporate stockholders are not allowed to hold S-corp stock, so that notion is opposite of the actual rule. Residency requirements exist (shareholders generally must be U.S. residents or citizens or fall into specific permitted categories like certain trusts or estates), but these nuances don’t map to a single, simple universal criterion as cleanly as the 100-shareholder limit does. Nonindividual entities aren’t broadly allowed either, except for limited trust/estate cases, so that statement isn’t generally correct.

S corporation eligibility centers on who can own shares. The most fundamental requirement is that there are 100 or fewer stockholders. This cap keeps the entity small and is a defining condition of Subchapter S status. The rule is explicit and universal, so having 100 or fewer shareholders is the best one-line summary of who can own an S-corp.

The other restrictions are real but more nuanced. Corporate stockholders are not allowed to hold S-corp stock, so that notion is opposite of the actual rule. Residency requirements exist (shareholders generally must be U.S. residents or citizens or fall into specific permitted categories like certain trusts or estates), but these nuances don’t map to a single, simple universal criterion as cleanly as the 100-shareholder limit does. Nonindividual entities aren’t broadly allowed either, except for limited trust/estate cases, so that statement isn’t generally correct.