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SUBCHAPTER – S CORPORATION

Why choose a S Corporation?

To combine corporate liability protection with the tax aspects of a partnership, consider this popular structure. There are, however, restrictions as to who may participate, which can be problematic when raising capital. For example, in addition to the restriction on the number of shareholders, foreign nationals may not hold subchapter-S stock.

How complicated is a S Corp to create and operate?

Creating a subchapter-S corporation is about as complicated as forming a standard C corporation (see above).

What tax issues should I consider?

Shareholders are taxed as if they were in a partnership, and they file individual rather than corporate tax returns.

Would my assets be at risk if I’m found liable for a problem?

As with a C corporation, there is no stockholder liability beyond the assets of the corporation.

How easy is it to raise money?

A subchapter-S corporation can have up to 35 stockholders. That enhances its ability to raise working capital. However, if you wish to offer shares to investors at large, you will have to form a standard C corporation.

What happens to my business if I sell, become disabled, or die?

A subchapter-S corporation offers the same flexibility as a C corporation (see above).