Subchapter S Corporation

An S Corporation is a variant of a standard, or "C" corporation, in which the income of the business passes through to the shareholders. The corporation itself does not pay any taxes, rather the shareholders report their income and expenses on their personal tax returns.

It avoids the double tax is presented when one or just a few individuals own a C corporation: the company pays taxes on corporate profits, and the owners pay taxes on their incomes. In an S corporation the owners are only taxed once.

Here's what Wikipedia, free, on-line encyclopedia, says:

An S corporation, for United States federal income tax purposes, is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S Corporations do not pay any income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.

As Bakar says, consider carefully when you set up a corporation. You should always consider things carefully, either in business or in life.

Also, be sure to consult an attorney and an accountant when you decide on the form of organization to create. They can advise you on your specific situation.

And keep in mind that laws differ by country. If you're reading this in England, you different things might obtain. If you are marketing to different countries, you should consider what laws obtain in different countries.

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