The popularity of S corporations has skyrocketed, with the number of businesses opting for them rising from 725,000 in 1985 to more than 3 million, according to the most recent statistics.And that growth is well-deserved, according to Richard Thompson, of the CPA and business advisory firm Sikich LLP. "S corporations have become such an important business vehicle because taxpayers understand their extreme value," he said.
Unlike a C corporation, an S corp generally pays no corporate income taxes on its profits. Instead, its shareholders pay income taxes on their proportionate shares, called distributive shares, of the S corp's profits.
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