Browsing: S Corporation

An S Corporation (S Corp) is a business structure in the United States that allows companies to pass income, losses, deductions, and credits directly to shareholders, avoiding federal corporate tax while still offering liability protection. This tax designation, established under Subchapter S of the Internal Revenue Code, is available only to small businesses with 100 or fewer shareholders. Unlike traditional C Corporations, S Corps do not pay corporate taxes; instead, profits and losses are reported on individual tax returns, reducing the risk of double taxation.

S Corporations provide benefits such as limited liability for owners, tax advantages, and simplified business operations. However, they must meet strict eligibility requirements, including having only one class of stock and ensuring all shareholders are U.S. citizens or residents. While S Corps offer financial advantages, they also require adherence to IRS regulations, including payroll tax obligations and formal corporate governance practices.