To Qualify as an S Corporation, a Company Must

question 255

Multiple Choice

To qualify as an S corporation, a company must:

• A) have no more than 50 shareholders.
• B) have shareholders who are individuals or estates and qualify as permanent residents of the U.S.
• C) have a different class of stock for each owner.
• D) have not more than 5 percent of income derived from passive sources.

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Definitions:

Assets

Resources owned by a company that have economic value and can be used to meet debts, commitments, or investments.

Stockholder's Equity

Refers to the ownership interest of shareholders in a corporation, calculated as the company's total assets minus its total liabilities.

Fiscal Year

A one-year period that companies and governments use for accounting and financial reporting, which may or may not align with the calendar year.

Business Activities

Various actions undertaken by a company in the pursuit of its commercial objectives, including operating, investing, and financing activities.