S-Corps are corporations that elect to pass corporate income, losses, deductions, and credits to their owners. To qualify as an S-Corp, a business must meet certain requirements. S-Corp shareholders report business income and losses on their individual returns. The business sends all shareholders a notice of their share based on their percentage of ownership. An S-Corp is either a domestic corporation or a domestic entity eligible to be treated as a corporation.
Taxation and Funding
S corps avoid double taxation. With an S corp, shareholders do not pay corporate income tax on company earnings. An S corp can raise money by issuing shares. In contrast, an LLC cannot issue shares to non-members.
Pros and Cons
When considering S corps, know the pros and cons. Tax benefits and ability to raise funds are advantages. However, S corps come with restrictions on ownership structure. Talk to an advisor to determine if an S corporation or LLC fits your business.
FAQ Section
What does C in C corp stand for?
How did S Corp get its name?