Subchapter S corporations often do business in foreign countries.

Subchapter S corporations, often referred to simply as S corporations, are special tax entities that allow income, losses, deductions, and credits to pass through to the shareholders for federal tax purposes. This setup is particularly beneficial for domestic operations where the shareholders are U.S. residents, as it avoids double taxation. However, there are specific IRS rules that restrict S corporations from having foreign shareholders or engaging in foreign business activities.

An S corporation can only have U.S. citizens or resident aliens as shareholders, which means engaging in business in foreign countries can complicate their status and compliance with S corporation regulations. Additionally, if an S corporation conducts substantial business outside of the U.S., it risks losing its S corporation status due to violations of the eligibility requirements outlined in the Internal Revenue Code.

These restrictions effectively limit the operational scope of S corporations when it comes to foreign business involvement. Therefore, stating that S corporations are often doing business in foreign countries reflects a misunderstanding of their structure and regulatory limitations.