Final answer:
An S corporation is limited to 100 shareholders to preserve its closely held status and allow for certain tax benefits similar to a partnership. Option A is correct.
Step-by-step explanation:
The maximum number of shareholders permitted within an S corporation is 100. This means the correct answer to the student's question is option a) 100. The S corporation structure was developed to provide a small company with the benefits of corporation status while allowing for a certain level of income to be passed through directly to shareholders for tax purposes, similar to a partnership. Maintaining fewer than 100 shareholders helps preserve the closely held nature of the business.