S Corporations

The good thing about them is that you have control, limited liability, you can raise capital and there is no double tax. The owners are treated for tax purposes like partners which means that there is no tax levied against the corporate earnings. The owners or shareholders are taxed directly on their dividends.

So why are not all the corporations S corporation? The answer is that the IRS has opened up this limited exception to corporations who meet certain requirements. An S corporation can have no more than 35 shareholders. Moreover, the S corporation can only have one class of stock, thus limiting corporate creativity and control.

Therefore S-Corp is essentially limited to small entities.

There are special filing requirements with the IRS