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How many shareholders are allowed for a S Corporation. How does related family members effect this...

How many shareholders are allowed for a S Corporation. How does related family members effect this number? Who is eligible to be a shareholder? Who is not eligible to be shareholders and why? Be specific and explain fully

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Answer #1

Maximum number of shareholders allowed for S Corporation now are 100 shareholders.

As per the family shareholder rules , All members of family are to be treated as Single S corporation shareholder. Here family include common ancestor and all lineal descendents , including spouse and former spouse.

Person who are eligible to be a shareholder :-

Individuals who are either U.S. Citizen or resident

Non profit organisations and tax exempted organisations

Trusts with individual as beneficiaries.

Person who are not eligible to be shareholder:-

Companies

partnerships

non resident

Business trusts

If in S corporation any ineligible person become shareholder then entire S corporation election will become null and void by IRS.

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