Subchapter S (S Corporation)

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DEFINITION of 'Subchapter S (S Corporation)'

A form of corporation that meets the IRS requirements to be taxed under Subchapter S of the Internal Revenue Code. This gives a corporation with 100 shareholders or less the benefit of incorporation while being taxed as a partnership. This means that any profits earned by the corporation are not taxed at the corporate level, but rather at the level of the shareholders. Also known as "S corporation".

BREAKING DOWN 'Subchapter S (S Corporation)'

Having S corporation status can prove a huge benefit for a corporation. The corporation can pass income directly to shareholders and avoid the double taxation that is inherent with the dividends of public companies, while still enjoying the advantages of the corporate structure. In order to qualify, a corporation must be a small business corporation. This means the following requirements must be met:

1) Must be a domestic corporation
2) Must not have more than 100 shareholders
3) Must include only eligible shareholders
4) Must have only one class of stock


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RELATED FAQS
  1. In what situations would a loan to an S Corporation from one of its principals be ...

    When a principal of an S corporation pays money into the business, vastly different tax consequences exist depending on whether ... Read Full Answer >>
  2. What is the double taxation of dividends?

    After all is said and done, companies that have made a profit can do one of two things with the excess cash. They can (1) ... Read Full Answer >>
  3. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  4. What is the Social Security tax rate?

    The Social Security tax rate is 12.4% as of 2015. Of that amount, the employee is responsible for half, or 6.2%, and the ... Read Full Answer >>
  5. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
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    The Old-Age, Survivors and Disability Insurance program, or OASDI, tax is calculated by taking a set percentage of your income ... Read Full Answer >>

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