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What is Subchapter S?

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.