Final answer:
An S-corp must have no more than 100 shareholders. In the Darkroom Windowshade Company, although investors 1 and 2 combined hold 38,000 shares, they do not have a controlling majority and would need votes from other investors to change top management.
Step-by-step explanation:
S-corporations are limited in the number of shareholders they can have. Specifically, an S-corp must have no more than 100 shareholders. This restriction helps maintain the closely-held nature of the company and qualifies it for certain tax benefits that are not available to corporations with a larger shareholder base. The correct answer to the question, 'S-corps must have no more than ___ shareholders,' is c. 100.
Regarding the Darkroom Windowshade Company scenario, to determine the minimum number of investors needed to change the company's top management, we must calculate who controls more than 50% of the voting shares. With investor 1 holding 20,000 shares and investor 2 holding 18,000 shares, if they agree to vote together, they collectively control 38,000 shares. Since this is less than a 50% majority of the 100,000 outstanding shares, they cannot be certain of always getting their way in how the company is run. They would need to secure additional votes from other investors to surpass the 50,000 shares threshold for a majority.