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subchapter S corporation

   Also found in: Financial, Acronyms, Wikipedia 0.01 sec.

subchapter S corporation n. the choice by a small corporation to be treated under "subchapter S" by the Internal Revenue Service, which allows the corporation to be treated like a partnership for taxation purposes. This may provide the benefit of passing losses (particularly in the early development of the business) to the stockholders. Technically the term "subchapter S corporation" is a misnomer since it is a normal corporation except for the election (choice) which is filed on a form provided by the I.R.S. normally immediately after incorporation, which election can be withdrawn before the beginning of a future taxable year. This election is usually prepared and filed with the I.R.S. by the company's accountant and not the incorporating attorney. (See: corporation)



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A Subchapter S Corporation requires forming a corporation with the state then making an election to be taxed as an S Corporation (pass-through taxation) with the IRS.
Conversely, Subchapter S corporations generally do not pay tax on profits.
Overview of the Subchapter S Corporation Designation Although the term Subchapter S Corporation sounds as if it applies to a certain type of company, in actuality, it is merely a term used by the IRS (Internal Revenue Service) to designate a particular tax status.
 
 
 
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