Key Takeaways

  • A corporation’s owners are called shareholders; they may be individuals, entities, or institutions.
  • C corporations can have unlimited owners; S corporations are limited to 100 shareholders and must meet IRS eligibility rules.
  • Shareholders can be passive or active and may influence corporate decisions based on their ownership percentage.
  • Ownership can change over time as shares are bought or sold, making corporate ownership dynamic.
  • Stock classes (common vs. preferred) impact voting rights and dividend preferences.
  • Ownership is distinct from management—officers and directors run the company on behalf of shareholders.

How many owners in a corporation is the number of shareholders a corporation has. The owners in a corporation are referred to as shareholders; if operating as a C corporation, there can be an unlimited amount of owners. However, if operating an S corporation, which is a subset of a C corporation, then there can only be a maximum of 100 owners.

Corporation: An Overview

When owning and operating a corporation, there are several corporate formalities that must be followed. For example, corporations must elect a board of directors to manage the business. In turn, the board will hire officers who will be responsible for the daily oversight of the business. Every year, the corporation must hold an annual shareholder and director meeting, which will take place one after the other. In addition to holding annual director and shareholder meetings, such meetings must be accompanied by meeting minutes that are kept on file for shareholders to view at any time.

Furthermore, depending on which type of corporation you own (C or S Corp), there will be ongoing requirements for tax payments. Particularly, if you own a C corporation, there are generally quarterly tax requirements. S corporations, however, operate as pass-through tax entities, meaning that all business profits and losses are passed onto the shareholders who then report it on their individual tax returns.

Shareholders in a corporation can benefit from receiving dividend distributions. Such distributions, however, are subject to taxation at the personal level. This means that the C corporation might incur double-taxation, once at the corporate level and again at the personal level if distributions are paid out during the taxable year.

While there could be some disadvantages to operating a corporation, particularly due to the ongoing corporate formalities and tax implications, there are also great benefits of operating a corporation. One of the greatest benefits of a corporation is the fact that it is viewed as a separate and distinct legal entity from its owners, which allows for limited liability protection for all shareholders. Therefore, while states differ in the formation and ongoing requirements of corporations, all states offer the same corporate protection laws for corporations (and LLCs). This means that the shareholders cannot be held personally liable for the business’s debts.

Creation of a Corporation

The corporation is created by filing the Articles of Incorporation in the respective state where the business plans on operating. This is the core document that provides basic business information. Included in this document will be the names of the board of directors, their titles, and responsibilities. You’ll need to submit this document to the Secretary of State, and include the applicable state filing fee. Once approved, there are still additional steps that need to be taken before doing business. This includes drafting the corporate bylaws, obtaining an Employer Identification Number (EIN), obtaining licensing and permits, and filing ongoing reports on an annual and/or bi-annual basis.

Ownership in a Corporation

Ownership in a corporation can be quite confusing to someone who is unfamiliar with the duties and responsibilities of those involved. The main parties in a corporation include the following:

1.Shareholders

2.Board members

3.Officers

Simply put, the owners of the business are referred to as shareholders. While the shareholders are “owners,” they don’t have full oversight. Therefore, if you own shares in Microsoft, you are a shareholder owner, but not an actual owner of the business; you won’t have an ability to make significant business decisions simply because you own stock in the company. If, however, you own 51% or more in a business, you will have greater voting power and ability to make important decisions regarding the business.

Every year, the shareholders elect a board of directors. Depending on the state, board members might be on the board for a period of one year or more. In turn, the board will elect officers to manage the business. Such officers include the CEO, CCO, COO, CFO, President, etc. These individuals will have daily oversight into the company’s affairs and are responsible for ensuring that it runs smoothly. Ultimately, however, the officers and board members are working for the shareholders— to keep the company afloat and earning an even bigger profit.

How Ownership Works in Different Types of Corporations

The number of owners a corporation can have depends on the type of corporation:

  • C Corporations: There is no limit to how many shareholders a C corporation can have. This makes it an attractive structure for businesses seeking to scale and attract a wide base of investors, including institutional and foreign investors.
  • S Corporations: These are limited to 100 shareholders, and those shareholders must be U.S. citizens or residents. Moreover, S corps can only issue one class of stock, which affects the distribution of voting power and dividends.
  • Close Corporations: These are typically small corporations with a limited number of shareholders (often under 30). They usually have shareholder agreements that restrict share transfers and allow the company to operate more informally.
  • Professional Corporations (PCs): These are formed by licensed professionals such as doctors or lawyers and generally restrict ownership to individuals licensed in that profession.

These distinctions are crucial when choosing a corporate structure and determining how many owners a corporation can have.

Who Can Be a Shareholder?

A shareholder can be:

  • An individual (U.S. citizen or foreign national, depending on corporation type)
  • A legal entity such as a trust, partnership, LLC, or another corporation (C corporations allow this, but S corporations do not)
  • An institutional investor or fund (typically in C corporations)

In S corporations, only eligible individuals and specific trusts can own shares. This restriction ensures compliance with IRS rules and avoids termination of S corp status.

Understanding Ownership Percentage and Control

Ownership percentage in a corporation is based on the number of shares held relative to the total shares issued. This affects:

  • Voting Power: Shareholders with more shares generally have more say in corporate decisions, such as electing directors or approving mergers.
  • Dividends: Shareholders may receive a portion of profits through dividends, often proportional to their ownership.
  • Influence Over Policy: Majority shareholders (those owning over 50%) can exert significant control over corporate direction, including appointing board members or amending bylaws.

However, not all shareholders are active participants. Many remain passive investors and rely on the board and officers to manage the company.

Common Stock vs. Preferred Stock

Corporations often issue different classes of stock:

  • Common Stock: Grants voting rights and typically entitles the holder to dividends. Most shareholders own common stock.
  • Preferred Stock: Usually does not grant voting rights but gives holders priority in dividend payouts and liquidation events.

Having multiple classes of stock allows corporations to tailor ownership rights, which can influence how power is distributed among shareholders.

Changes in Ownership Over Time

Corporate ownership is not static—shares can be bought, sold, inherited, or transferred. Key scenarios that lead to ownership changes include:

  • Sale of shares to new investors
  • Employee stock option exercises
  • Inheritance or gifting of shares
  • Redemption or repurchase of shares by the corporation

This dynamic nature is part of what distinguishes corporations from simpler business entities like sole proprietorships or partnerships.

Why the Number of Owners Matters

Understanding how many owners a corporation has is important because it affects:

  • Regulatory compliance: S corps must not exceed 100 shareholders or they risk losing tax benefits.
  • Tax classification: The IRS distinguishes between different types of entities based on ownership.
  • Corporate governance: A greater number of shareholders may require more formal communication, voting processes, and transparency.
  • Investor relations: Startups and growing corporations must balance equity distribution with control, often using shareholder agreements to manage expectations.

Frequently Asked Questions

  1. How many owners does a corporation have?
    A corporation can have one or more owners, known as shareholders. C corporations can have unlimited shareholders, while S corporations are limited to 100.
  2. Can a corporation be owned by just one person?
    Yes, a corporation can have a single owner who holds all the shares, particularly in small businesses or closely held corporations.
  3. What’s the difference between shareholders and directors?
    Shareholders own the corporation through stock ownership. Directors are elected by shareholders to oversee corporate governance and major decisions.
  4. Who cannot be a shareholder in an S corporation?
    Non-resident aliens, corporations, partnerships, and most types of trusts cannot own shares in an S corporation.
  5. Does the number of owners affect how a corporation is taxed?
    Yes. For example, exceeding 100 owners disqualifies a corporation from S corp status, requiring it to be taxed as a C corporation instead.

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