Rts Direct Corporate

S-Corporation is a regular corporation that has 100 shareholders or less and that passes-through net income or losses to its shareholders for tax purposes (similar to sole proprietorship or partnership). Since all corporate income is “passed through” directly to the shareholders who include the income on their individual tax returns, S Corporation are not subject to double taxation.

An eligible domestic corporation (C-Corporation) can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S-Corporation. Generally, an S Corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S-Corporation’s shareholders include their share of the corporation’s income or loss.

S-Corporation vs. C-Corporation: Like C-Corporations, S-Corporations are separate legal entities from their shareholders and, under state laws, generally provide their shareholders with the same liability protection afforded to the shareholders of C corporations. Unlike C-Corporations, for Federal income tax purposes taxation of S corporations resembles that of partnerships. Thus, income is taxed at the shareholder level and not at the corporate level. Certain corporate penalty taxes (e.g., accumulated earnings tax, personal holding company tax) and the alternative minimum tax do not apply to an S-Corporation.

Unlike a C-Corporation, an S-Corporation is not eligible for a dividends received deduction (a tax deduction received by a corporation on the dividends paid to it by other corporations in which it has an ownership stake). Unlike a C-Corporation, an S-Corporation is not subject to the 10% of taxable income limitation applicable to charitable contribution deductions. Who Can Form an S-Corporation? S-Corporations are more suitable for small and family businesses, and for those who starts their business with small investment. Also, some existing businesses qualify for S-Corporation status.