Business Glossary

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.

business concern chartered as a corporation that is taxed as a partnership. An S corporation can use the cash basis of accounting, has 75 or fewer shareholders, and corporate gains (or losses) from operations are taxed to the shareholders as individuals. Also known as a small business corporation.