Glossary Terms

S-Corporation

An S-corporation is a small business that pays no income tax. Instead, all of the income or losses for the business are passed through to its shareholders, who must report them on their personal tax returns.

An S-corporation is a small business that pays no income tax. Instead, all of the income or losses for the business are passed through to its shareholders, who must report them on their personal tax returns.

At a company’s inception or at the beginning of a new tax year, it can elect how it wants to be taxed. One of the options for small businesses with 100 or less shareholders is to be taxed as an S-corporation. The gives the business the benefit of incorporation while being taxed as a partnership.

S-corporation filing received its name from Subchapter S of the Internal Revenue Code.