July 1, 2016 cbstemp

What is an S corporation?

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. 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. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

To qualify for S corporation status, the corporation must meet the following requirements:

Be a domestic corporation

Have only allowable shareholders

May be individuals, certain trusts, and estates and

May not be partnerships, corporations or non-resident alien shareholders

Have no more than 100 shareholders

Have only one class of stock

Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations)