What Is a Subchapter S Corp?
A subchapter S corporation is a unique type of corporation in which the owners of the company are able to pass the company's profits and losses to their individual tax return like a partnership or sole proprietorship. S corporations are created according to the terms of the Internal Revenue Code (IRS).
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Ownership and Size
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An S corporation cannot have more than 100 owners or shareholders. Trusts, estates, U.S. citizens and residents of the U.S. may own shares of an S corporation. People and businesses that are located outside of the U.S. are not permitted to own shares of an S corporation.
Stock
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S corporations are allowed to issue one class of stock. This means that all shareholders of an S corporation will receive the same rights in terms of compensation received from the company, according to the Reference For Business website.
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Formation
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S corporations are required to go through the same formation process as a regular corporation, meaning documents must be filed with the company's state of incorporation in order to create the company. S corporations are required to file Form 2553 with the IRS within 75 days of filing formation paperwork with the state.
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