What is a S-Corporation?
A S-Corporation is a special form of corporation (NOTE: The S in S-Corporation refers to subchapter S of the tax code). S-Corporations are based on C-Corporations but they are NOT treated as a separate tax entity as C-Corporations are. Instead, the income of a S-Corporation is passed-through as personal income of its owners (shareholders) in proportion to their ownership interest. A S-Corporation is created by forming a traditional C-Corporation, and then filing the IRS Form 2553 (The Subchapter S Election) for Federal recognition of S-Corporation tax status. While the S-Corporation has many of the features as a C-Corporation, there are some important differences. NOTE: While the S-Corporation features similar pass-through taxation to a LLC, in the area of self-employment taxes an S-Corporation can have an advantage over an LLC. The compensation (salary and bonuses) of S-Corporation shareholders is subject to self-employment tax, but not on the profits automatically allocated to them a
