Subchapter S Corporations

Simply stated, a S Corporation is taxed in the same manner as a partnership and is not taxed at the federal level. The income or losses and expenses flow through to the shareholders. A "C" Corporation pays tax on its profits, and if the owner shareholders take profits from the corporation, the distributions take the form of taxable dividends. In effect, this is a double taxation of profits. There are advantages and disadvantages to both S Corporations and Regular C Corporations. Speak to your local CPA about the tax strategies of selecting the type of entity for your business.