Most small business owners have heard of an S Corp. Very few know what the ‘S’ actually means

What Does the “S” in S Corp Stand For?

The “S” in S Corp stands for Subchapter. It refers to Subchapter S of the Internal Revenue Code, which gives qualifying corporations special tax treatment.
An S Corporation allows business income, losses, deductions, and credits to pass directly to shareholders. This helps the business avoid double taxation at the corporate level.

What is an S Corp?
An S Corp is a corporation that elects special tax status with the IRS.
Instead of paying corporate income tax, the business passes profits and losses to shareholders. Shareholders then report that income on their personal tax returns.

Why businesses choose S Corp status
S Corp status can help small business owners:
• Avoid double taxation
• Reduce self-employment taxes
• Protect personal assets through corporate structure
• Pass income directly to shareholders

Who qualifies for S Corp status?
To qualify, a business must:
• Be a domestic corporation
• Have 100 shareholders or fewer
• Have only one class of stock
• Have shareholders who are U.S. citizens or residents
• File IRS Form 2553

S Corp vs C Corp
The main difference is taxation.
A C Corp pays corporate taxes before profits reach shareholders. An S Corp passes income directly to shareholders, helping avoid double taxation.

Bottom line
The “S” in S Corp stands for Subchapter. For many small business owners, S Corp status offers tax advantages, liability protection, and a simpler way to pass income through to owners.