LLCs can have an unlimited number of members; S corps can have no more than 100 shareholders (owners).
The S corporation shareholder limit is 100 shareholders, whereas C corporations have no shareholder limitation. S corporations are those companies that meet S corporation eligibility and choose to be taxed under the IRS Code Subchapter S.
(A 2-percent shareholder is someone who owns more than 2 percent of the outstanding stock of the corporation or stock possessing more than 2 percent of the total combined voting power of all stock of the corporation.)
Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.
A corporation must meet certain conditions to be eligible for a subchapter S election. First, the corporation must have no more than 75 shareholders. In calculating the 75-shareholder limit, a husband and wife count as one shareholder.
But the Internal Revenue Code does place several restrictions on who can be shareholders in order for the corporation to qualify to be an S corp. Shareholder restrictions: S corps are restricted to no more than 100 shareholders, and shareholders must be US citizens/residents.
Thus, if the S corporation has 1,000 shares of voting stock outstanding, the S corporation would issue 9,000 shares of nonvoting stock and warrants exercisable into 90,000 shares of nonvoting stock to the original shareholders. The warrants may be exercised at any time over a period of years.
Limited number of shareholders: An S corp cannot have more than 100 shareholders, meaning it can't go public and limiting its ability to raise capital from new investors.
When a privately-held company exceeds 500 shareholders of record and has assets exceeding $10 million, it may trigger registration and reporting obligations. This threshold serves as a regulatory trigger point for increased transparency and disclosure requirements, regardless of whether the company is publicly traded.