S corporation
Definition
A corporation that qualifies and elects to be an S corporation under the Internal Revenue Code. Unlike C corporations, S corporations typically do not pay taxes to the federal government. Instead, most S corporations are taxed indirectly through their shareholders. An S corporation must have a limited number of shareholders, giving rise to the related statutory term "small business corporation." 26 U.S.C. § 1361(b)(2).
See 26 U.S.C. § 11, 26 U.S.C. § 1361(a), and 26 U.S.C. § 1363(a).
See also
Definition from Nolo’s Plain-English Law Dictionary
A term that describes a profit-making corporation whose shareholders have applied for and received subchapter S corporation status from the Internal Revenue Service (IRS). Electing to do business as an S corporation lets shareholders enjoy limited liability status, as would be true of any corporation, but be taxed as a pass-through tax entity, where income taxes are reported and paid by the owners, like a partnership or sole proprietor. (A regular, or C, corporation is taxed as a separate entity from its owners.) To qualify as an S corporation, a number of IRS rules must be met, such as a limit of 100 shareholders and U.S. citizenship for all shareholders.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:24 pm
