• S corporations are businesses that prefer to pass their income, deductions, losses, and credit through shareholders for the benefit of limited liability and to avoid double taxation. S corporations are excused from federal income tax, but not tax on specific capital gains and passive income. They are appealing in that they function like a partnership, allowing for taxes to be paid only at the individual income tax level. A regular corporation is subject to being taxed on both the corporate and individual income tax levels. Tax laws vary according to different municipalities and states, so some advantages may not apply.
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