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S Corporations

An S Corporation (S Corp) is simply a variation of the standard corporation.  This entity has the same structure as a standard corporation in that it is chartered under state law and is separate from its shareholders and officers.  There is general limited liability for corporate shareholders.  As with a corporation, there is a requirement to file Articles of Incorporation with the State Corporation Commission.

S corporations are usually taxed somewhat like a partnership in that the income, losses and tax credits flow-through to the owners who report such information on their individual tax returns.   This entity had to file Form 2553, Election by a Small Business Corporation, to be treated differently for tax purposes.

Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income.

An S Corporation files Form 1120S, U.S. Corporation Income Tax Return for an S Corporation.  The income flows-through to be reported on the shareholders individual returns.  Schedule K-1, Shareholder’s Share of Income, Credits and Deductions, is completed along with Form 1120S.  Shareholders must pay tax on their share of corporate income regardless of whether it is actually distributed.