S Corporation (S Corp) 

An S Corporation (S Corp) is a special type of corporation that elects to pass corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes. This means that income is taxed at the shareholder level rather than the corporate level, helping to avoid double taxation. S Corps are popular with small businesses in the United States seeking the legal protections of a corporation while maintaining tax benefits similar to a partnership or sole proprietorship. To qualify for S Corp status, a company must: 

• Be a domestic corporation. 

• Have only allowable shareholders (individuals, certain trusts, and estates—not partnerships, corporations, or non-resident alien shareholders). 

• Have no more than 100 shareholders. 

• Have only one class of stock. 

S Corps still file annual tax returns and follow corporate governance formalities like issuing stock, holding board meetings, and maintaining corporate records.