Your accountant should be in a good position to identify the merits of forming your business as a Sub S corporation. The Sub S type of corporation does not pay a federal corporate income tax. In a regular corporation, the firm pays a federal tax on its profits and the stockholders pay tax only on the dividends they receive. In the Sub S corporation, the firm does not pay a federal tax, but the stockholders pay a tax on the firm's profit rather than on the dividends they receive. In a sense, Sub S stockholders pay the corporate federal tax at their personal rate on their federal tax returns.
Many states charge a corporate income tax.
The Sub S distinction is made at the federal tax level. Some states treat Sub S corporations as regular corporations. These states thereby tax the stockholders only for the dividends they receive. The IRS limits the number of people who can own stock in the business. The 1986 Tax Reform Act set a limit of 35 stockholders for a Sub S corporation.