A Sub chapter S (S corporation) is an ordinary business corporation which elects to pass

corporate income, losses, deductions, and credits through to their shareholders for federal tax
purposes. The S corporation meets the definite internal revenue code requirements which
give a corporation with 100 shareholders or less the benefit of incorporation while being
taxed as a partnership.

Under US federal income tax law, if any corporate taxed separately from its owners, it is
called as a C corporation.

The key differences between S corporation and C corporation are as follows:

Eligibility:

 S Corporation must be domiciled in the US and must have 100 or fewer shareholders.
 C Corporation does not have any criteria about eligibility. The unregistered firm can be
chosen for C Corporation and register the same as per the applicable state laws.

Issuing stock:

 S Corporation offers only one class of stock.

 C Corporation offers the stock to all the stockholders who are ready to invest.

Structure:

 Like partnership firm, S Corporation passes all the profits and losses through its
shareholders.
 In C Corporation, the firm and its shareholders taxed separately which helps the
shareholders to protect their assets from creditor’s claims.

Corporate formalities:

 Under S Corporation:
o All the shareholders should sign and submit the form 2553 once the article of
associate or incorporated certificate submitted.
o Form 1120S is mandatory to file the US corporate tax returns.
 Under C Corporation:
o Board of directors must be formed to operate the management and functions.
o It is required to submit income, payroll taxes, unemployment to state.