These are types of corporations that opt for an alternative way to pay annual income taxes. Rather than the S Corp paying the tax itself, the company’s losses, income, credits, and deductions are paid by the owners.

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Pros

• Owners enjoy limited liability for business’ judgments, debts, and other liabilities

• Perpetual life

• Ability to raise capital via stock

• No double taxation and no corporate taxation

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Cons

• Citizenship and residency requirements

• Ownership is limited to 100 shareholders

• More requirements, expensive to create than partnerships and proprietorships  

• Need to comply with formalities, like holding board and shareholder meetings and creating bylaws

• You can only have one type of stock

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