Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What limitation do C Corporations have regarding ownership?

1. They can have a maximum of 50 shareholders

2. They have no restrictions on ownership

3. They are limited to foreign ownership

4. They can only be owned by individuals

The correct answer is: They have no restrictions on ownership

C Corporations, also known as C Corps, operate under specific regulations set forth in the Internal Revenue Code, particularly regarding ownership. One of the key characteristics of C Corporations is that they have no restrictions on the number or type of shareholders they can have. They can issue multiple classes of stock, which allows for different voting rights, dividends, and other characteristics, providing flexibility to appeal to various investors. This lack of restriction means that C Corporations can have an unlimited number of shareholders, including individuals, other corporations, and even foreign entities, without jeopardizing their corporate status. This characteristic makes them a popular choice for larger companies or those seeking to raise capital from a broad base of investors. In contrast, other entity types, such as S Corporations, do have limitations on the number and type of shareholders they can accept, specifically capping the number at 100 and restricting ownership to U.S. citizens or resident aliens. Therefore, the notion that C Corporations can have unrestricted ownership aligns with their structural advantages as a business entity.