subchapter S corporation


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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which is filed on a form provided by the I.R.S. normally immediately after incorporation, which election can be withdrawn before the beginning of a future taxable year.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)

References in periodicals archive ?
The assumption that because there is already one unfair business tax, that of double taxation on Subchapter S corporations, that it makes sense to add the same faulty reasoning and the same double taxation to an LLC is faulty logic.
By contrast, LLC owners and Subchapter S corporations avoid this double taxation on a sale of assets because the business's tax liabilities are passed through them; the LLC or S corporation does not pay a tax on its income.
In Environmental Chemical Corporation, (534) the board had an opportunity to address the issue of whether state income taxes paid by shareholders of a Subchapter S corporation (535) are allowable as general and administrative (G&A) expenses.
While such concerns appear to be without foundation, there can be no assurance that the earnings of businesses conducted in LLC form will not be subjected to some form of additional entity-level taxation by such States as some jurisdictions already do with respect to Subchapter S corporations.
The legislation is also good news for 2,300 existing Subchapter S corporation banks and 1,400 additional community banks considering electing S corporation status.
When Congress passed the Small Business Job Protection Act of 1996, it made community banks eligible to elect Subchapter S corporation status for the first time in tax year 1997.
Cloutier presented ICBA's top recommendations for Subchapter S reform: * Allowing IRAs shares to be eligible Subchapter S corporation shareholders * Increasing the maximum number of Subchapter S corporation shareholders to 150 and counting family members as one shareholder * Allowing community bank Subchapter S corporations to issue certain preferred stock * Reforming the treatment of bank director shares * Excluding bank income from the passive income test.
Senator Allard's bill promotes the needed tax reforms that would allow more community banks and small businesses to elect Subchapter S corporation status which is a proven means to prevent punitive double taxation.
Allowing more community banks and small businesses to elect Subchapter S corporation status is one of the best and proven means to prevent double taxation.
30 /PRNewswire/ -- The Independent Community Bankers of America is urging the Bush Administration and Congress to expand the opportunity for community banks to use the beneficial Subchapter S Corporation tax status as part of any new tax relief package.
Congress made community banks eligible to elect Subchapter S Corporation status for the first time in tax year 1997.