for tax purposes, a corporation or entities like an LLC that request corporate taxation have a choice between two types of corporate taxation. 1) C-corp the corporation pays taxes on the income and distributions to the shareholders are taxed as dividend income
2)S-corp which requires filing form 2553 along with form 8832 for non-corporate entities electing this taxation. the shareholders pay the tax on the income or deduct the loss and distributions are tax-free. having sufficient tax basis is important for losses to be deductible and distributions to be tax-free.
