An S-Corporation is a hybrid entity with the benefits of a corporation but the taxation of a partnership.

 

Key Highlights

• Structure of a corporation with the pass through advantages of a partnership.

• Limited liability for stockholder.

• Has perpetual life.

• No more than 100 shareholders.

 

Formation

• Legal documents must be filed with the state.

• Same incorporating process as C-Corp.

• Limits on number of shareholders and type of shareholders (no foreign owners).

 

Operations

• Shareholders are considered the “owners.”

• The shareholders elect a board of directors that oversee the company.

• The board of directors hire the officers (CEO, CFO, CMO etc.).

• The officers run the day-to-day operations of the corporation.

• In small corporations you can have an individual who is a stockholder, member of the board. and a corporate officer. This is common for S-Corps where the owner also manages the business

 

Termination

• Directors vote to dissolve the corporation.

• Involuntarily dissolved judicially (bankruptcy, cases of fraud, etc.).

• Failure to pay annual fees or file annual reports.