The S corporation qualifying rules no longer are relevant once the S election is initially made.

Question

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The S corporation must continue to meet certain qualifying rules to maintain its S corporation status, including having no more than 100 shareholders, having only allowable types of shareholders (such as individuals, estates, and certain trusts), and only having one class of stock. Failure to meet these rules can result in the loss of S corporation status.

The S Corporation Qualifying Rules No Longer Are Relevant Once