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More about how subchapter S corp distributions are taxed:
- http://wanderingtaxpro.blogspot.com/2007/11/ask-tax-pro-taxing-sub-s-corp.html
- http://taxes.about.com/od/scorporations/qt/scorp_criteria.htm
- No capital gains tax for 5 percent tax bracket clients
- http://www.aicpa.org/pubs/taxadv/online/mar2004/tpm.htm
S-Corporations, like regular C Corporations, can decide to retain their net profits as operating capital. However, all profits are considered as-if they were distributed to shareholders. Thus an S-Corporation shareholder might be taxed on income they never received. (Whereas a shareholder of C-corporation is taxed on dividends only when those dividends are actually paid out.)
S-Corp must pay officers salary. It must be reasonable, and not below minimum wage - http://taxes.about.com/od/scorporations/qt/reasonable_comp.htm
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