An S-Corp is the same legal structure as a corporation, but it enjoys a special tax status, which is granted by federal tax law. For tax purposes, S-Corps are treated liked partnerships or sole-proprietorships. An S-Corp gains its special tax status by filing certain documents with the Internal Revenue Service (IRS), within a specified time period after incorporating. The special tax status continues until shareholders change it, or the corporation no longer meets the requisite legal requirements.
· An S-Corp enjoys all of the advantages of a corporation, and in addition, it does not pay corporate income tax.
· Individual shareholders report profits and losses on individual tax returns.
· S-Corps must qualify and comply with strict legal requirements.