AICPA CPA-Business Exam - Topic 2 Question 123 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 123
Topic #: 2

[All CPA-Business Questions]

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

AIt has only one class of stock.

BIt has at least one partnership as a shareholder.

CIt has international ownership.

DIt has more than 75 shareholders.

Show Suggested Answer

Suggested Answer: A

Choice 'a' is correct. A corporation may elect to be taxed like a partnership under Subchapter S only if it has only one class of stock.

Choice 'b' is incorrect. A corporation can elect S corporation status only if its shareholders are individuals, estates, or certain types of trusts.

Choice 'c' is incorrect. Foreign shareholders generally are prohibited in an S corporation.

Choice 'd' is incorrect. An S corporation can have up to 100 shareholders, but it may have fewer.

by Maybelle at Apr 04, 2026, 07:07 AM

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Bobbye

4 days ago

I feel like international ownership is definitely not a requirement for S corp status. It seems like it would complicate things too much.

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Margarita

9 days ago

I remember practicing a question similar to this, and I think it was about the number of shareholders. I know S corporations have a limit, but I can't recall the exact number.

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Oliva

14 days ago

I think the requirement about having only one class of stock is correct, but I'm not entirely sure if that's the only one.

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