What is an S Corporation? | IASourceLinkSophie Troxell
What is an S Corporation?
Have fewer than 100 shareholders
Have shareholders who meet the eligibility requirements
Have only one class of stock
Be incorporated within the U.S.
We’ve discussed an individual’s ability to be a shareholder within an S corporation, but what about an employee? Shareholders can double as employees, earning salaries and tax-free corporate dividends. It does come with one stipulation: the dividends cannot be more than the stockholder’s stock basis. If they exceed the stock basis, the excess is taxed as capital gains. Beyond its tax status, an S corporation is very similar to a C corporation.
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