Which of the following is a requirement for a corporation to elect S corporation status?

Q: What mistakes do candidates make on this CPA question?

Thinking partnerships can own S Corp stock.

Answer options:

It must have only one class of stock.

It must have at least 500 shareholders.

It must be a foreign corporation.

It can have partnerships as shareholders.

How to approach this question

S Corp Rules: Domestic, <100 shareholders, Individuals/Estates/Trusts only (no corps/partnerships), 1 Class of Stock.

Full Answer

A.It must have only one class of stock.✓ Correct

To qualify as an S corporation, the entity must be a domestic corporation, have no more than 100 shareholders (family members count as 1), have only eligible shareholders (individuals, estates, certain trusts), and have only one class of stock.

Common mistakes

Thinking partnerships can own S Corp stock.

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