S-Corporation

An S Corporation begins its existence as a general, for-profit corporation upon filing the Articles of Incorporation at the state level. A general for-profit corporation (also known as a 'C Corporation') is required to pay income tax on taxable income generated by the corporation.

However, after the corporation has been formed, it may elect "S Corporation Status" by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well). Once this filing is complete, the corporation is taxed like a partnership or sole proprietorship, rather than as a separate entity. Thus, the income is "passed-through" to the shareholders for purposes of computing tax liability. Therefore, a shareholder's individual tax
returns will report the income or loss generated by an S Corporation.