S CORPORATIONS
01.Core Concepts
Disadvantages Advantages Limited to 100 shareholders Income passed through to shareholders for income tax purposes Only one class of stock is permitted Shareholders have limited liability Cannot have corporate, partnership, certain trusts, or nonresident alien shareholders Distributions from S corporations are exempt from the payroll tax system, if the shareholder/employees are adequately compensated Shareholder/employees owning more than two percent of the company are considered to be self-employed for fringe benefit purposes Borrowing may be difficult without stockholder personal guarantees