What Is a Subchapter S Corporation?

What Is a Subchapter S CorporationA subchapter S corporation, or S corporation, is a corporation that shares certain features and advantages of partnerships. There are limitations and exclusions, however, so it is best if you consult with a College Station corporation lawyer before deciding upon establishing as an S corporation.

Advantages of S Corporations

An S corporation retains many of the qualities of a conventional, or C corporation. Both have stock and shareholders, and are operated in accordance with state statutes. However, as your College Station corporation lawyer will share with you, S corporations differ in some rather distinct ways from their conventional counterparts.

In a C corporation, shareholders experience what amounts to as double taxation. First, income flowing into the corporation is taxed on the corporate level. Then, shareholders must pay taxes on dividends. With an S corporation, the corporation, itself, is not taxed. Rather, the income flows through the corporation to the shareholders, who pay tax in accordance to their interest in the corporation.

Restrictions

As your College Station corporation lawyer will tell you, S corporations are ineligible for a dividends received deduction, and shareholders are not able to take a 10% charitable contribution deduction. Moreover, the business must:

  • Be solely operated as a domestic corporation
  • Can only issue one class of stock
  • Cannot possess more than 100 shareholders, who must be U.S. citizens or residents. If a family owns stock, they are counted as one shareholder.

A College Station corporation lawyer Can Help You Establish Your S Corporation

If you would like to set up an S corporation, or you have questions, work with a College Station corporation lawyer who has the experience and knowledge to provide you with superior advice. Call Peterson Law Group today at 979-703-7014.

About Chris Peterson

Chris Peterson is an attorney and the owner and founder of Peterson Law Group, a Texas law firm with offices in Bryan/College Station and Kingwood. He mainly practices in the areas of Estate Planning and Business Planning. Chris is also a Certified Estate Planner. Besides his law practice, Chris is a serial entrepreneur and community volunteer. He is known for his cutting edge law practice that utilizes technology to deliver efficient, excellent work.