Subchapter S refers to a section of Chapter 1 of the U.S. Internal Revenue Code.
A subchapter S corporation, which is also referred to as an S corporation, is a corporation that does not pay the income taxes on its income. Rather, the owners of the S corporation are responsible for the income taxes which pertain to their share of the S corporation’s income. Hence, the income statement of an S corporation does not report income tax expense, and the balance sheet does not report income taxes payable.
There are certain requirements in order to elect the Subchapter S status. Learn more about Subchapter S corporations at www.IRS.gov or from a tax professional.
