Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

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Prepare for the CAPS Exam with a comprehensive study of Module 2. Utilize our practice resources filled with flashcards, multiple choice questions, and thorough explanations to ensure your success!

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What is a defining characteristic of an S Corporation?

Unlimited shareholders
Taxed like a corporation
Max 100 shareholders
Easy to set up and maintain

The correct answer is: Max 100 shareholders

An S Corporation, or S Corp, is characterized by a critical limitation on the number of shareholders it can have, specifically a maximum of 100 shareholders. This feature is designed to differentiate S Corporations from traditional C Corporations, which can have an unlimited number of shareholders. The limitation helps maintain the S Corp's status as a smaller, closely-held corporate structure, which can have specific operational advantages, especially in terms of taxation and regulatory requirements. The restriction on the number of shareholders serves to ensure that S Corporations remain manageable and subject to different taxation rules that can benefit smaller businesses. Additionally, an S Corp allows profits (and losses) to pass through directly to the owners' personal income without being subject to corporate tax rates, a tax treatment that emphasizes the need for a defined and limited structure in terms of ownership. This structure is particularly appealing for small businesses that wish to avoid the double taxation typically associated with C Corporations while enjoying some corporate benefits.