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Business Definition for: S Corporation
Dictionary of Finance and Investment Terms
S Corporation
See also subchapter s
Dictionary of Business Terms
S Corporation

corporation with a limited number of stockholders (100 or fewer) that elects not to be taxed as a regular (C) corporation and meets certain other requirements. Family members may elect to be treated as one shareholder. Shareholders include in their personal tax returns their pro rata share of capital gains, ordinary income, tax preference items, and so on. This form avoids corporate double taxation while providing limited liability protection to shareholders of a corporation.

Related Terms:
subchapter s

section of the Internal Revenue Code giving a corporation that has 35 or fewer shareholders and meets certain other requirements the option of being taxed as if it were a partnership. Thus a small corporation candistribute its income directly to shareholders and avoid the corporate income tax while enjoying the other advantages of the corporate form. These companies are known as Subchapter S corporations, tax-option corporations, or small business corporations.

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 Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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