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What is an "S" corporation?
An S corporation (formerly called Subchapter S because it was named for a section of the U.S. Internal Revenue Code enacted in 1958) is a form of tax status that the incorporator can elect instead of incorporating or operating as a C corporation. This S election enables the shareholder(s) of a closely held company to enjoy limited liability and other corporate advantages but avoid the penalty of double taxation that occurs when corporation income is subjected, first, to corporate income tax, and is then taxed a second time, as personal income, when corporate earnings which have already been taxed are returned to the shareholders in the form of dividends.
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