A 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 S 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 on S Corporations
As your 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 Texas S 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.
