What is the distinction between a subchapter C and S corporation?
The Internal Revenue Code allows for two different levels of corporate tax treatment. Subchapters C and S of the Code define the rules for corporate taxation. Subchapter C corporations are comprised of mostly large, publicly-held businesses. These corporations are doubly taxed on their profits if they pay dividends. C corporations file their own tax returns and pay taxes on profits before disbursing dividends to shareholders. Additionally, the shareholders are then taxed on their individual tax returns. Subchapter S corporations meet certain requirements that allow the business to protect shareholders from the debts incurred by the corporation, while avoiding the double taxation of a subchapter C. To meet the criteria for subchapter S treatment, corporations must be domestic; cannot be associated with any larger corporate group; must have no more than one hundred shareholders; may only have one class of stock; must not have any corporate or partnership shareholders; and cannot have any
