"S Corporation" means nothing more than a regular corporation which elects to be taxed under subchapter S of the Internal Revenue Code. "C Corporations" are regular corporations which are taxed under subchapter C of the Internal Revenue Code. Talk about s corporations or "S Corporation forms", as if there were a separate legal entity of that name, is thus improper, since State corporation laws make no distinction between the two. Four principal laws concern you when you form an entity: (1) state laws concerning formation of that entity (2) state and federal laws concerning the issuance of its stock or membership interests (3) federal tax law and (4) state tax law. We can assist you with respect to items 1 and 2, and we strongly urge that you consult the person who is familiar with your tax situation - your tax advisor -for assistance with respect to items 2 and 3.

Certain general observations about taxation may be stated. If the shareholders file nothing with the IRS, they will be taxed under subchapter C. If they file an election on form 2553, they will be taxed under subchapter S. To qualify, the corporation must be a domestic corporation with only one class of stock and no more than 75 shareholders, all of whom consent in writing and are individuals, estates, exempt organizations or certain trusts, and none of whom are nonresident alien shareholders. For complete information about qualification, refer to your tax advisor and the instructions for form 2553 at the Internal Revenue Service website.

There are tax advantages to S corporations (for those who are able to qualify for such treatment) which are similar to the tax advantages of limited liability corporation (also a misnomer - the proper term is limited liability company). If the organizers do not qualify to file the election, they may be able to get the same advantages by forming an llc. A limited liability company is taxed in accordance with an election made on form 8832, but where two or more individuals are involved, it is treated as a partnership by default. This means that there is pass-through taxation available for a limited liability company, just as there is for qualified s corporations.