S Corporation. - 2007/05/10 22:16
After the corporation has been formed, the stockholders may elect "S Corporation" status by making a filing with the IRS. An S Corporation is taxed like a partnership and the profits and losses of S Corporations flow through to the federal tax returns of the owners in proportion to their stock ownership. They are protected from the liabilities of the business as in a C Corporation. The S-corporation structure is generally preferred over a standard corporation when most of the shareholders are employed by the corporation or otherwise involved in its day-to-day activities, and the corporation distributes most of its income to its shareholders each year. In other words, for small businesses.
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