Subchapter S Corporation

A Subchapter S Corporation, often called an S Corp, is a special type of corporation that allows profits and losses to pass directly to shareholders, avoiding double taxation on corporate income. This means that the business itself doesn’t pay federal income tax; instead, shareholders report the income on their personal tax returns. To qualify, the corporation must meet specific IRS requirements, including having a limited number of shareholders and only issuing one class of stock. This structure often benefits small business owners by providing liability protection while allowing for simpler tax treatment.