What is an S corporation?

An S corporation is a small business entity that is treated as a regular corporation for all purposes other than its treatment under tax law. To make a "subchapter S election," a corporation must satisfy a number of requirements:

• All shareholders must consent to the S corporation status
• The number of shareholders is limited to 100 (25 for tax years beginning prior to 2004)
• The corporation can issue only one class of stock
• The S corporation must be a domestic corporation, and its shareholders must be citizens or residents of the United States
• Only individuals, estates, S corporations, and certain trusts can be shareholders of the S corporation