Glossary · People and paperwork
S-Corporation(S-Corp)
In short
A business entity that passes corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes. This structure helps avoid double taxation on corporate income.
What it means in a deal
Many small businesses are structured as S-Corps. When buying an S-Corp, you're typically doing an asset purchase to avoid inheriting past liabilities, not a stock purchase. Understand how the seller's distributions affect the business's cash flow for your loan application.
Related terms
Common questions about S-Corporation
- 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?
- 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?
- What is the SBA's requirement for a buyer's post-closing working capital position?
- What specific documentation is required for a lender to verify U.S. citizenship if an owner was born in a U.S. territory or abroad to U.S. parents?
- Can a seller note be used to finance the entire seller's equity contribution to the buyer's business?
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.
Know what you'll need before you apply
Tell us about the deal and who's buying — we'll flag the guaranty, eligibility, and paperwork issues that slow SBA approval before they cost you time.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.