S-Corporation

A corporation that has elected to be taxed under subchapter-S of the IRS Code (and therefore not taxed under subchapter-C) by filing a Form 2553 tax election within 75 days of incorporating or 75 days from the beginning of the calendar year. The election is limited to corporations or LLCs with one class of shareholders (or two classes where the only difference between the classes is Voting and non-Voting) with no more than 100 natural person stockholders (no entities or trusts, all of whom are U.S. citizens or green card holders). Every calendar year the corporation must file an 1120S return and therefore it is not required by law to pay income tax and thus passes its taxable income or losses through to its shareholders as reported on a Form K-1 each year. An LLC can also be taxed as an S-corporation by filing a 2553 election under what is called the “check-the-box” regulations.