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.