Yes.
You can keep an S-Corp open even if the S-Corp is losing money. If the S-Corporation is going to remain open, you need to make sure you continue to file the Form 1120S' on time. Further, you need to be careful that you do not deduct S-Corporation losses that are more than your adjusted basis in the S-Corp.
See the following from IRS S Corporation Stock and Debt Basis (This also has a great example of how to calculate the basis in your stock):
S Corporation Shareholders are Required to Compute Both Stock and Debt Basis
The amount of a shareholder's stock and debt basis in the S corporation is very important. Unlike a C corporation, each year a shareholder's stock and/or debt basis of an S corporation increases or decreases based upon the S corporation's operations. The S corporation will issue a shareholder a Schedule K-1.
It is important to understand that the K-1 reflects the S corporation's items of income, loss and deduction that are allocated to the shareholder for the year. The K-1 shows the amount of non-dividend distribution the shareholder receives; it does not state the taxable amount of a distribution. The taxable amount of a distribution is contingent on the shareholder's stock basis. It is not the corporation's responsibility to track a shareholder's stock and debt basis but rather it is the shareholder's responsibility.
If a shareholder receives a non-dividend distribution from an S corporation, the distribution is tax-free to the extent it does not exceed the shareholder's stock basis. Debt basis is not considered when determining the taxability of a distribution.
Loss or Deduction Flow-Through Items
If a shareholder is allocated an item of S corporation loss or deduction, the shareholder must first have adequate stock and/or debt basis to claim that loss and/or deduction item. In addition, it is important to remember that, even when the shareholder has adequate stock and/or debt basis to claim the S corporation loss or deduction item, the shareholder must also consider the at-risk and passive activity loss limitations and therefore may not be able to claim the loss and/or deduction item.
S Corporation Stock and Debt BasisImportance of Stock Basis
It is important that a shareholder know his/her stock basis when:
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The S corporation allocates a loss and/or deduction item to the shareholder.
In order for the shareholder to claim a loss, they need to demonstrate they have adequate stock and/or debt basis.
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The S corporation makes a non-dividend distribution to the shareholder.
In order for the shareholder to determine whether or not the distribution is non-taxable they need to demonstrate they have adequate stock basis.
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The shareholder disposes of their stock.
As with any asset, including C corporation stock, when the asset is sold or disposed of, basis needs to be established in order to reflect the proper gain or loss on the disposition.
Since shareholder stock basis in an S Corporation changes every year, it must be computed every year.
