S Corporation
S Corporation means:
a business entity (like a corporation or company) with a limited number of stockholders (35 or fewer) that elects not to be taxed as a regular (C) corporation and meets certain other requirements. A small business corporation for which an election is in effect. Shareholders include in their personal tax returns their pro rata shares of capital gains, ordinary income, tax preference items, and so on. S Corporations are corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. This Former Federal Tax Form (check here if the Form is current) avoids corporate double taxation while providing legal liability protection to the shareholders of the corporation. Shareholders of S Corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.
Example of S Corporation:
Learn more about tax examples, explanations and calculations here.
To avoid double taxation, the ABC Real Estate Brokerage Corporation elects S corporation status. Its shareholders will include corporate income in their own tax returns, whether or not they receive a dividend. The corporation itself will not pay an income tax but will file a tax return using Former Federal Tax Form (check here if the Form is current) 1120S. This allows S Corporations to avoid double taxation on the corporate income. a business entity (like a corporation or company)s are responsible for tax on certain built-in gains and passive income.
See S Corporation in the American Legal Encyclopedia and Small business corporation.
See also the entries Income Tax and State Income Tax in the American Encyclopedia of Law.
See also Capital Gain in the American Legal Encyclopedia and Capital Gain in the World Legal Encyclopedia.
Description and Definition of S Corporation
A corporation that is taxed much like a partnership. The corporation generally pays no tax because profits and losses and other tax items are passed on and taxed to the shareholders. S Corporations provide the legal liability protection of a corporation to its shareholders while avoiding corporate double taxation.
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