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S Corporation

Definition - What does S Corporation mean?

An S corporation is a company that has 100 or fewer shareholders and that is not taxed on the corporate level. Instead, shareholders are taxed individually on their profits. Shareholders must all be United States citizens for the company to qualify as an S corporation. S corporations are taxed according to Subchapter S of the IRS code.

Justipedia explains S Corporation

An example of an S corporation would be a juice company that has 75 shareholders who are all United States citizens, and the company has filed articles of incorporation with the state it is located in. In these circumstances, the corporation would not be taxed at the corporate level. Instead, each shareholder would be taxed individually for his or her profits. So, if each shareholder made $20,000, then each shareholder would also have to include that $20,000 in their annual taxes.

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