By Jedidah McKeehan

When I think of different types of business entities that exist, there are a few that come to mind first.  Usually people have heard of an LLC, which is a limited liability company.  Another common type of entity is a corporation.  If an entity is a corporation it may have the name, “Business, Inc.”  The Inc. after the name stands for, “incorporated.”

But what is an S-Corp?  An S-Corp, is an “S Corporation” a closely held corporation that elects to be taxed under Subchapter S of Chapter of Internal Revenue Code.

If you want a very thorough and complete review of what S-Corps are and what they can and cannot do, I would encourage you to check out the Wikipedia page on them, but let’s cover some of the basics in this article.

So, if you go to the Tennessee Secretary of State website to create a new business entity, there is no box to check to, “create an s-corp.”  Instead you would need to create a corporation, an LLC, or a partnership.  Your company becomes an “S-Corp,” only by nature of the election of how to be taxed.

A business has to have certain qualifiers in order to be taxed as a nS-Corp.  To be taxed as an S-Corp: a business must have: no more than 100 shareholders, have only individuals (and not businesses) and shareholders, no nonresident aliens as shareholders, and has only one class of stock.

Another important point, an S-Corp. does not pay federal taxes as an entity.  Instead, the earnings or losses are reported on the tax returns of the individual owners/shareholders of the S-Corp.

Jedidiah McKeehan is an attorney practicing in Knox County and surrounding counties.  He works in many areas, including criminal, personal injury, landlord-tenant, probate, and estate planning. Visit for more information about this legal issue and other legal issues.