ESB Certification Practice Exam 2025 – Complete Study Resource

The suitable type of corporation for companies with a limited number of shareholders is an S Corporation. S Corporations are designed specifically to address small businesses with fewer shareholders, typically allowing for up to 100 shareholders. This structure enables the corporation to enjoy the benefits of pass-through taxation, where income is taxed at individual shareholder rates rather than at the corporate level, which can be advantageous for smaller companies looking to minimize their tax burden.

C Corporations, on the other hand, can have an unlimited number of shareholders and are not limited in the same way as S Corporations, which makes them less suitable for smaller entities. A Limited Liability Company (LLC) also offers different benefits but does not fit the classic corporate structure, while Nonprofit Corporations serve a distinct purpose in operating for public or charitable benefits without profit distribution to shareholders. Thus, the S Corporation is the most appropriate choice for companies with a limited number of shareholders due to its specific restrictions and advantageous tax treatment.