An S corporation is a corporation that has elected to be taxed as a flow though entity (similar to an LLC or LP). The “S” also refers to an IRS code section. Providing for this type of taxation, the S election allows the shareholders to be taxed only at the individual level instead of at both the corporate and individual level, thus avoiding the double taxation like the C corporation. The S corporation still provides limited liability protection and is a good entity for many business situations.

S Corps are favored by many business owners. The single taxation (as opposed to the double tax of a C Corp) is limited liability protection – especially with a Nevada corporation with charging order protection extended to corporate shares – make the S Corp an attractive entity choice.

Please know that of all of the entities the S Corp has certain restrictions on ownership. There can only be 100 or fewer owners, which all must be individuals or their living trusts. Corporations, multi member LLCs, and non-US residents cannot be S Corp owners. If the restrictions aren’t followed, the IRS will deem the corporation a double taxed C Corp.

Corporate Direct can help you understand the restrictions and benefits of the S Corporation.