To take S corporation status, your business must meet specific requirements:
Can issue no more than one class of stock
All shareholders must be U.S. residents, estates, trusts, and tax-exempt organizations
Can have no more than 100 shareholders
Must be a domestic business entity
Can’t have ineligible shareholders, such as financial institutions or insurance companies
If your business doesn’t meet these requirements, the IRS will terminate your S corp election and your corporation will automatically revert to a C corp.