Hi, welcome to Alva no Harlan com. Today we're talking about myths surrounding corporations, and I have a pet peeve with using language appropriately. So, I want to educate you guys on some things that are used in standard business parlance, which are inaccurate when describing corporations. The most prolific myth that I found is the use of the terms S corp and C corp. Some people say, "I have an S corporation," but that is actually incorrect. Let's break down what these terms mean. When you start an Inc, it is a stock corporation. Simply put, it has a president and a vice president. Under the law, their stocks issue 100 shares. However, the IRS treats it as a C Corp, which means the company is taxed. To avoid this, you have to make an election within a certain time period when the corporation is created. Now, let's talk about the S corp. This is a simple key concept. With an S corp, you say, "This is my company, my Inc. I've got stock." When money comes in, it flows out to me as an individual, and no taxes are paid on the corporate level. The taxes are paid by me, the individual owner of the company. Many people mistakenly set up a stock corporation and think they have set up an S corp. However, to be treated as an S corp, you have to make an election with the IRS. This is especially important if you have real estate in the company. As we go through this module, let's make sure we understand the misconceptions. We're going to assume that you've made the election with the IRS and that you are now an S corporation, although you're technically still a stock corporation that has made an S election. Just a tip, you should keep...
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