The maximum number of shareholders for an S corporation is 100. This limit is a federal tax-eligibility requirement under Subchapter S of the Internal Revenue Code, rather than a general limit on how many owners an ordinary corporation may have.
S corporations are corporations that elect pass-through federal tax treatment. Instead of generally paying corporate income tax on business profits, the corporation’s income, deductions, and credits pass through to shareholders, who report their shares on their individual returns. The shareholder cap helps define the closely held structure Congress intended for this tax regime.
The rule has technical exceptions. For example, certain family members may be treated as one shareholder, and some estates, trusts, and tax-exempt organizations can qualify as shareholders. S corporations also generally must have only one class of stock and cannot have nonresident alien shareholders.
The common mistake is to treat 100 as a universal corporate ownership limit. It applies to S-corporation status; a corporation that exceeds the limit can lose its S election and generally be taxed as a C corporation instead.