Introduction to S Corporation Taxation

Understanding S Corporations

An S corporation is a corporation that elects special federal tax treatment under Subchapter S of the Internal Revenue Code. Unlike a C corporation, an S corporation is generally a pass-through entity, meaning most income, deductions, credits, and losses pass directly to shareholders instead of being taxed at the corporate level.

• Separate legal entity under state law.
• Generally not subject to federal income tax at the entity level.
• Income and losses pass through to shareholders.
• Shareholders report their allocated share on individual tax returns.