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What is a Sub Chapter S Corporation?

April 26, 2017Chapter corporation sub

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What is a Sub Chapter S Corporation?

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A sub-chapter S corporation is the legal equivalent of a regular c corporation under state law. Once a corporation is formed, the owners may have the option to elect to have corporate profits taxed under sub-chapter S of the Internal Revenue Code. The result of this election is that corporate profits are taxed directly to the owners (on their Form 1040) at the Federal level and escape taxation at the state level.

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If you are a Citizen or Permanent Resident of the United States, this is generally the most tax advantageous type of Corporation you can have. A Sub-Chapter S Corporation does not pay any Federal Corporate Income Tax, so that the earnings of the Corporation flow directly to the owners.