Glossary · Reading the business
S-Corp
In short
This is a type of corporation that passes corporate income, losses, deductions, and credits directly to its shareholders for federal tax purposes, thereby avoiding double taxation.
What it means in a deal
Many small businesses operate as S-Corps. When analyzing a seller's financial statements, understanding how S-Corp income was distributed to owners is critical for accurately calculating Seller's Discretionary Earnings (SDE) or EBITDA. After acquiring the business, you will choose your own entity structure, often an LLC taxed as an S-Corp, to manage your personal and business tax burden effectively.
Related terms
Common questions about S-Corp
- Are there any specific business entity structures (e.g., LLC, S-Corp) required for an SBA 7(a) loan?
- Can funds from a retirement account, like a 401(k), be used for my equity injection if rolled into a new C-corp via a ROBS plan?
- How does a lender confirm an owner's U.S. citizenship if they were born in a U.S. territory or abroad to U.S. parents?
- Can a foreign corporation own a minority (less than 20%) stake in an SBA 7(a) loan applicant business?
- Does my business need to be set up as an LLC or Corporation for an SBA 7(a) loan?
- What is the SBA's requirement for a buyer's post-closing working capital position?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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