Termination of S Corporation Status
Losing S Corporation Election
An S corporation election may terminate voluntarily or involuntarily. Violating eligibility requirements, such as issuing an impermissible second class of stock or admitting an ineligible shareholder, may terminate S status.
- Voluntary revocation.
- Loss of eligibility.
- Second class of stock.
- Ineligible shareholders.
- Consequences of termination.
Tip
Eligibility requirements continue after the election is made—they must be maintained throughout the corporation's existence.
Summary
Maintaining S corporation status requires continuous compliance with federal eligibility rules.