Accounting Dictionary

Subchapter S Corporation

A subchapter S corporation also known as an S corporation provides the liability protection of a “C” corporation and the taxation attributes of a partnership for domestic companies with less than 100 shareholders and one class of stock.

S corporations can pay non-employee owners dividends which are not subject to self-employment taxes. Their corporate status helps them borrow money and compete for contracts. However, in order to cut down on paperwork, many small companies that will not be traded on a stock exchange are choosing to be LLCs rather than S Corps.

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