S Corporation

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S Corporations get their name from filing on IRS Corporation rules Subchapter S. This popular small business structure is legally a corporation, but taxed as a pass through entity. Until the single member LLC (files as a sole proprietorship) or a multi-member LLC (files as a partnership), the S Corporation allows the business to divide the payments to the owner into payroll (subject to payroll taxes) and profits (not subject to payroll taxes). In contract, the other structures require the owner to pay self employment taxes on the full income.

S Corporations must have a limited number of shareholders (< 100), a single class of stock, and be entirely owned by natural persons or estates. S Corporations are a very popular, and tax advantaged status for small businesses.

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