If you are interested in operating your new business as an S corporation, it is important to be aware that only corporations that meet certain criteria are eligible to elect S corporation status. Therefore, here are the basic requirements for eligibility as an S corporation. The corporation must be a domestic corporation (i.e., a corporation organized or created in the United States or under the law of the United States or of any state or territory), and have:

1. 100 or fewer shareholders;
2. Only individuals, estates, qualified trusts, and/or certain tax exempt organizations as shareholders;
3. No nonresident aliens as shareholders; and
4. Only one class of stock.

Note that there are no revenue restrictions on the type of business that can operate as an S corporation. In other words, there is no requirement a corporation must operate on a small scale in order to elect S corporation status.

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There are many details beyond these basic rules (for example, a husband and wife, and their estates are treated as one shareholder for the 100 shareholder rule). If you are interested in learning more about becoming an S-corp, please contact our offices at (443-406-6441 or complete our contact form to request an appointment to discuss in greater depth the rules related to S corporation eligibility.