Privacy, Business and Law

A “regular” corporation is a corporation that is taxed under Subchapter C of the Internal Revenue Code. No election is made for this purpose; it is the default method of taxation for corporations. Under Subchapter C, there is a tax paid at the corporate level and at the shareholder level, assuming the shareholders receive dividends or other income or distributions from the corporation. Corporations, which meet certain requirements, may file an election to be taxed under Subchapter S of the Code, which is similar to taxation of partnerships. The tax items of the corporation are passed through to the shareholders. There are restrictions on the type and number of shareholders that a Subchapter S corporation can have, and the election must be filed within a specific time period to be effective.