An S Corporation is a variation of a corporation within Subchapter S of Chapter 1 of the Internal Revenue Code. Essentially, an S Corp is any business that chooses to pass corporate income, losses, deductions, and credit through shareholders for federal tax purposes, with the benefit of limited liability and relief from “double taxation.”

Form 1120-S is filed by S corporations. This business structure allows a corporation to pass corporate income, losses, deductions, and credits through to shareholders for federal tax purposes.

S Corp shareholders report income, gains, and losses from the corporation on their individual tax returns and pay taxes at their ordinary income tax rates. Since the money comes to them free of corporate tax, they avoid double taxation on any income or earnings.