From the course: Running a Web Design Business: Defining Your Business Structure

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S corporation: Advantages and disadvantages

S corporation: Advantages and disadvantages

From the course: Running a Web Design Business: Defining Your Business Structure

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S corporation: Advantages and disadvantages

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In order to understand how S-Corporations work, make sure you have watched the previous video about C-Corporations. An S-Corporation is a C-Corporation that has selected to be taxed as a small business corporation, by filing the IRS Form 2553. Only domestic corporations with less than 100 shareholders qualify to be selected as S-corporations. So I sometimes think of the S as small corporation even though S actually refers to the sub-chapter S of chapter one in the internal revenue code. S-Corporations enjoy all the advantages of C-corporations, like limited liability, ease in raising capital and perpetual existence. But S corps also enjoy two bonuses called pass-through taxation and elimination of double taxation. Let's take a look at these two advantages. An S corp is not an independent tax paying entity, like a C-corp so all the profits and loses are past through the shareholders personal income tax returns. However, the S-corporation must annually file IRS form 1120S to report…

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