What is a S-Corporation ?

 What is a S- Corporation?

 

The S-Corporation status indicates the way in which a business has elected to be taxed.

S-Corporation status is a good option for many small businesses. For qualified owners of a domestic small business, the S-Corporation status provides liability protection to each owner similar to the C-Corporation. However, with the S-Corporation owners can also take advantage of “pass-through taxation”. Because the S-Corporation is considered a “pass-through entity” by the IRS, the business itself isn’t taxed at the corporate level. Instead, business income or loss is “passed through” to shareholders who then report it on their individual income tax returns. This means that business profit may be taxed at a lower rate and business losses can offset other income on each shareholders’ tax returns.

Some Defining Characteristics of the S-Corporation

Do you need to create an S-Corporation?