What is an S Corporation?
There are several different types of corporations from which business owners can choose when they initially set up their business. One type of corporation is an S corporation. The “S” in “S Corporation” refers to Chapter 1, Subchapter S of the United States Internal Revenue Code. Owners who choose to incorporate an S Corporation are choosing not to have the Corporation pay income taxes but rather to have each shareholder pay personal income tax (or report a loss) on the shareholder’s proportionate share of income (or loss) from the S Corporation. In order to elect to incorporate as an S corporation, the company must have only one class of stock and not more than a certain number of shareholders. Since all of the shareholders are responsible to the IRS and state revenue department for their proportionate share of the corporation’s profits or losses, all of the shareholders must be US citizens or residents and must be people and not other legal entities (such as other corporations, LLC or LLPs.)
Other Business & Corporations FAQs
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What are the advantages of forming a Corporation?
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What is a C Corporation?
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What steps are required to form a corporation?
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What steps are required to form an LLC?
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What are the advantages of organizing a business as a Sole Proprietorship?
A: A sole proprietorship is a business that is owned by an individual and that is not formed pursuant to any special legal construct, such as a limited liability … More -
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What is equity financing?
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What is debt financing?
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What is limited liabilty?
A: Limited liability is a principle of business law which shields the owners of a business from the business's liabilities. Owners of a business which … More -
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What are the advantages of a limited liability partnership (LLP)?
A: A Limited Liability Partnership (LLP) has many of the same characteristics as a general partnership. However, there is one important advantage to the LLP … More -
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What are the advantages of a limited liability company (LLC)?
A: A Limited Liability Company (LLC) is a form of business organization which combines some of the benefits of a corporation with some of the benefits of a sole … More
