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An S corporation (or S Corp), for United States federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. [1] In general, S corporations do not pay any income taxes. Instead, the ...
Corporations which are not S Corporations are known as C corporations. The US tax reform legislation enacted on December 22, 2017 (Public Law (P.L.) 115–97) changed the law of 'worldwide' to 'territorial' taxation in the US.
A C corporation is distinguished from an S corporation, which generally is not taxed separately. Many companies, including most major corporations, are treated as C corporations for U.S. federal income tax purposes. C corporations and S corporations both enjoy limited liability, but only C corporations are subject to corporate income taxation. [1]
That vastly simplifies tax filing and helps S corporations avoid corporate taxes. In some cases, LLCs can elect to be taxed as S corporations, which can offer tax benefits. B corporation.
If a foreign corporation is not identified on the list included in these regulations, it qualifies as an eligible entity. The list of foreign entities classified as corporations for federal tax purposes (so called per se corporations, not eligible to make an entity classification election) includes, as of September 2009: [4]
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After electing corporate tax status, an LLC may further elect to be treated as a regular C corporation (taxation of the entity's income prior to any dividends or distributions to the members and then taxation of the dividends or distributions once received as income by the members) or as an S corporation (entity level income and loss passes ...
Corporate tax rates generally are the same for differing types of income, yet the US graduated its tax rate system where corporations with lower levels of income pay a lower rate of tax, with rates varying from 15% on the first $50,000 of income to 35% on incomes over $10,000,000, with phase-outs.
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