What is one of the primary benefits of establishing a Subchapter S Corporation?

Establishing a Subchapter S Corporation offers the significant benefit of allowing income to be passed through to shareholders without being subject to federal income tax at the corporate level. This means that the corporation itself does not pay taxes; instead, the individual shareholders report the income or loss on their personal tax returns. This avoids the double taxation that typically applies to traditional C Corporations, where both the corporate entity and the shareholders are taxed on the income.

This pass-through taxation can be a considerable advantage for business owners as it often results in a lower overall tax burden compared to other business structures. Additionally, because the income is taxed only at the individual level, shareholders can potentially benefit from lower tax rates that apply to individual income, compared to corporate tax rates.

The other options do not align with the characteristics of a Subchapter S Corporation. Lower operational costs can be influenced by various factors beyond corporate structure, and while a Subchapter S Corporation limits liability, it does not eliminate it completely. Lastly, the ability to issue stocks publicly is a characteristic of C Corporations, not S Corporations, which have restrictions on the number and type of shareholders they can have.