Company founders filing their business at the state level can choose to incorporate as an S-corporation. This type of company structure provides similar liability protections as a C-corporation; however, they are taxed on a “flow-through” basis.
Rather than paying a corporate tax, all income or losses are passed on to the company owners, also known as shareholders. An S-corporation may have one single shareholder or up to 100 shareholders as long as they are individuals, not businesses, and they are U.S. citizens.
Shareholders may hold company stock. However, the organization may only issue one type of stock. These restrictions are why start-ups looking for external funding, either from shareholders or capital venture investors, usually choose to incorporate as a C-corporation.
According to IRS.gov, certain companies cannot be structured as an S-corporation, including certain financial institutions, insurance companies, and domestic international sales corporations.