Which of the following is listed as a disadvantage of S-Corporation?

• A. More expensive to create
• B. More limits on issuing stock
• C. Board meeting requirements do not apply
• D. Lots of formalities

Answer: (D)

S-Corporations must maintain corporate governance just like other formal businesses. Even though the tax treatment is pass-through, you still need to hold regular board meetings, keep minutes, pass resolutions, and maintain proper corporate records. That ongoing administrative requirement is the main drawback highlighted here, because it adds time, effort, and costs to run the business. Statements suggesting board meetings don’t apply or that formation is more expensive aren’t accurate reflections of the typical disadvantages. Stock restrictions can be a drawback too, but the listed item emphasizes the ongoing governance burden as the notable downside.