Explain the process and steps required in an S Corporation being terminated or revoked as an S Corporation.
The criteria for an entity to qualify as a S corporation are:
1. The entity should not have more than 100 shareholders.
2. There should be no ineligible shareholder.
3. The entity should not have more than one class of stock.
If any of the above conditions are not met at any point of time then such entity will be terminated to qualify as a S Corporation.
Process to revoke as S Corporation:
There is no separate IRS form to revoke S Corporation election. The Corporate should file an written application with appropriate stating IRS service center its intention to revoke as S Corporation.
The written statement must get consented by more than 50% of shareholders including non voting stock. The revocation will be effective from the date specified in statement which cannot be prior to date of filing statement.
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