Not all business organizations fall neatly into the categories that we have described. Other types of business organizations are described below.
The S corporation – the corporation for a small business. A small business can enjoy many of the advantages of the corporation without being subject to corporate taxes if it is organized as an S corporation. S corporations take their name from a Congressional addition to the income tax law known as Subchapter S.
Unlike a regular corporation whose profits are subject to the corporation income tax and the individual income tax, S corporations are taxed like a partnership. That is, profits or losses are allocated to the stockholders in proportion to the number of shares they hold and are reported on their regular tax return.
Hurley Burleigh owns 25% of the shares of Blye’s Barley, Inc.. Blye’s is an S corporation. Last year the firm earned a profit of $60000. Since his share of the profits came to $15000, Burleigh reported that amount as income on his tax return.
In order to qualify for S corporation status, a firm must not have more than 35 stockholders and cannot own more than 80% of another corporation. As with regular corporations, the services of a lawyer are usually needed to organize an S corporation.
Non-for-profit corporations. As the name suggests, non-for-profit corporationsdo not seek to earn profit. Rather, they serve particular educational, social, charitable or religious purposes. Since they earn no profits, they are not subject to income taxes.
Government-owned corporations. Federal, state or local governments own and operate corporations. In most instances these were created to provide services that private enterprise was unable or unwilling to offer. The U.S. Postal Service, the Federal Deposit Insurance Corporation, some metropolitan rapid transit services and other publicity owned utilities are examples of government-owned corporations.