S corporation – n : a form of legal organization
for a business, commonly used only by small and/or closely-held companies (the
"S" refers to Subchapter S of the U.S. Internal Revenue Code). S corporations
are “pass-through” entities for tax purposes; that is, they pay no corporate
tax, and all financial profits or losses “pass through” or “flow through”
proportionately to the shareholders on a pro rata basis. This form of
organization can be advantageous for shareholders, because: a) it avoids double
taxation; and b) individual shareholders can receive the tax benefits of a
business’s losses. However, an S corporation can have no more than 75
shareholders and is subject to limitations as to whom or what type of entity
can own the business. (Note: See also LLC or limited liability corporation,
another form of business legal organization that shares the “pass-through”
feature of the S corporation.)
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Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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