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Corporation > Managing the Corporation: Duties and Responsibilities - Pg. 30

30 Raising Capital The document that determines the mechanical aspects of the corporation's governance is known as the bylaws. The bylaws may not exceed the scope of the articles of incorporation or the authority set forth in the state's statute. Subchapter S Corporations If your corporation meets certain IRS requirements, you can choose "S" status, which affects how the corporation is taxed on the federal level. An S corpora- tion must have no more than 75 shareholders, who (with very few exceptions) must be both individuals and U.S. residents, and the corporation cannot have two classes of stock with different financial interests. The management respon- sibility is the same as in a regular corporation (which is taxed under Subchap- ter C of the Internal Revenue Code), but the S corporation doesn't pay federal tax on its income. Rather, the profits and losses are passed through to the shareholders and are declared on the individuals' tax returns. The main reason to elect S corporation status is that you avoid the double taxation inherent in a Subchapter C corporation.