An S-Corporation is a regular corporation that has between 1 and 100 shareholders and that passes through net income or losses to its shareholders. Subchapter S-Corporations must meet specific eligibility criteria, and they must notify the IRS of their choice to be taxed as an S-Corporation within a certain period of time.
An S-Corporation is not subject to corporate tax rates. Generally, an S-Corporation is exempt from federal income tax other than tax on certain capital gains and passive income.
Instead, an S-Corporation passes through profit (or net losses) to its shareholders. The business profits are taxed at individual tax rates on each shareholder's Form 1040. The pass-through or flow-through nature of the income means that the corporation's profits are only taxed once - at the shareholder level.
S-Corporations therefore avoid the so-called double taxation of dividends.
One important point, only one class of stock can be issued.
S-Chapter
Have more questions? Submit a request
0 Comments