Legal Question in Business Law in Florida

What is a 'S" corporation?

What is a 'S" corporation?

"S" corporations have the same basic advantages and disadvantages of "C" corporations with the added benefit of a special tax provision which allows all profit or loss of the company to "pass through" to the personal 1040s of the stockholders. When a "C" corporation makes a profit, on the other hand, it pays a federal corporate income tax on the profit. If the company then declares a dividend, the shareholders must report the dividend as personal income and pay more taxes. This is commonly referred to as a "double tax" (once at the corporate level and again at the personal level) which "S" corporations avoid altogether. Law requires all "S" corporations to be domestic, have less than 75 stockholders who are US citizens, issue only one class of stock, and derive no more than 25 percent of gross corporate income from passive activities. To get an "S" corporation requires completing IRS Form 2553.