Contractor License Practice Exam 2025 - Free Contractor License Practice Questions and Study Guide

Question: 1 / 400

Can "S" Corporations retain their status regardless of the number of stockholders?

True

False

"S" Corporations must adhere to specific regulations regarding stockholders to maintain their status. A key requirement is that they can have a maximum of 100 stockholders. This rule is in place to ensure that these corporations remain closely held entities, where the benefits of pass-through taxation can be effectively managed among a limited number of shareholders. If the number of stockholders exceeds this limit, the corporation will lose its S Corporation status and be subjected to corporate taxation under C Corporation rules.

The response indicating that "S" Corporations cannot retain their status regardless of the number of stockholders is indeed accurate, as exceeding the 100-stockholder limit leads to disqualification as an S Corporation. Therefore, understanding these limitations is essential for anyone managing or considering starting an S Corporation to ensure compliance with IRS regulations.

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Only up to 50 stockholders

Only if they have a single stockholder

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