The C-corporation also allows for multiple types of shareholders. This is accomplished by issuing different types of stock, each with its own rights and privileges. These situations are usually reserved for larger, more sophisticated organizations. An S-corporation is not taxed on its operations. All activity of the business flows to the individual shareholders and is taxed as part of their personal income tax return.
Losses can also flow to the individual shareholder.
Those losses, however, can be used only to the extent the shareholder has made a direct cash investment in the business. If the losses exceed the investment, they again are carried forward until such time as the business reports a profit to offset the unused losses. A tax issue applicable to a publishing business operating as an S-corporation has to do with circulation expenses. When a publisher incurs costs associated with increasing or maintaining its file size, the costs receive special treatment by the company. They are reported separately to the individual shareholders in proportion to their ownership percentage.