Under US tax law, the maximum number of shareholders an S corporation may have is 100. This limit is one of the eligibility requirements in Internal Revenue Code section 1361 for corporations choosing S corporation tax treatment.
An S corporation is generally a domestic corporation that elects pass-through taxation. Instead of the corporation ordinarily paying income tax on its earnings, income, losses, deductions, and credits generally flow through to shareholders, who report them on their individual returns. The shareholder ceiling is intended to keep the structure focused on relatively closely held businesses.
The number alone is not enough to qualify. Shareholders usually must be individuals, certain trusts, or estates; corporations, partnerships, and nonresident aliens generally cannot own shares. An S corporation also generally may have only one class of stock and cannot be certain types of financial institution, insurance company, or domestic international sales corporation. Family members may sometimes elect to be treated as one shareholder for counting purposes.