Qualifying to Be an S Corporation
A corporation must meet several requirements to qualify as an S corporation.
Some of those requirements include the type of corporation that will qualify; the number of shareholders the corporation can have; the type of entity that can be an eligible shareholder; the type of stock the corporation can issue; and the type of income it can generate.
In addition, there are several types of elections that the corporation or its shareholders must make to qualify as an S corporation, including an election to be treated as an S corporation; an election to treat a subsidiary as a qualified S corporation subsidiary; and elections by trusts to be treated as eligible shareholders.
If any of the requirements are not met at any time, the corporation’s S election will be inadvertently terminated.