What Is A Delaware S Corporation?
A Delaware S Corporation, also known as a Delaware S Corp or Subchapter S Corporation, is a Delaware general or close corporation that, in general, does not pay federal income taxes. A Delaware S Corp requires that you first form a Delaware general or close corporation, and the file Form 2553 with the IRS in 75 days of the formation date. If the IRS approves your application, the federal tax liability will be passed through to individual shareholders according to ownership of the Delaware S Corp and not your corporation.
What is Subchapter S?
The approval of Subchapter S tax status allows profits of the corporation to pass through the business entity to the individual shareholders and is only taxed once. It is reserved for small business corporations and refers only to a corporation's federal taxation. If you do not file for Subchapter S status your corporation will be a Delaware C Corporation, which means that your corporation's profits will be taxed twice if shareholders receive dividends.
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