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Page 11 of 32 |
I keep hearing the terms ‘c’ and ‘s’ when referring to corporations. What is that all about? |
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Nothing mysterious. The designations "C" and "S" refer only to how the corporation is TAXED. It has nothing to do with the legalities used to set up the corporation.
For federal tax purposes, corporations are taxed under either Subchapter C or Subchapter S of the Internal Revenue Code. A corporation is automatically taxed under Subchapter C (double taxation) unless it qualifies and receives IRS approval to be taxed under a different set of IRC provisions as an S corporation. Under those rules, the corporate level tax is ignored and the S’s tax liability is reported on the shareholder’s income tax return.
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