"C" corporation or "S" corporation - What's the difference?
An "S" corporation can be a very attractive business entity available to small companies. An "S" corporation can have up to 100 shareholders, all of whom must be citizens or residents of the U.S. It has the benefits of incorporation, while eliminating "double taxation" by allowing the taxable income to pass-thru to the stockholder's personal tax return. Instead of being taxed at the corporate level, profits and losses are taxed at the shareholder's personal tax rate. These extra tax advantages are not available to shareholders in a regular "C" corporation. But there are limitations to "S" corporations in that only one class of stock can be issued, no corporate shareholders are allowed, and all shareholders must be U.S. citizens or taxpayers.