Things You'll Need:
- Computer with Internet access
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Step 1
Recognize that if a company is taxed under the more common Subchapter C, the company itself pays its taxes. However, companies on a Subchapter S plan allow the tax liabilities of the company to pass through to the shareholders, usually called partners.
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Step 2
Know that even though profits and tax liability are passed through to the partners of a company taxed under Subchapter S, these same partners are still shielded from the company's other liabilities in the same way that shareholders in a C corporation are protected.
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Step 3
Look at who pays the taxes to know if a corporation is taxed under Subchapter S. If the company files and pays taxes under its own taxpayer identification number, then that company is not being taxed under Subchapter S.
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Step 1
Start with the right taxation strategy for your corporation if you are building a business. Changing tax strategies later in the game may involve costly legal or accountant fees that can be avoided with a bit of good advice up front.
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Step 2
Know that S corporations often work best with just a few responsible partners or shareholders, since each can count on the other to file taxes in a timely manner.
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Step 3
Understand that when you choose to incorporate, you will have a plethora of complicated decisions to make. This does not mean, however, that you should simply choose what's easiest for now, and put off more demanding decisions for when you have more time to understand them.
