{"id":4911,"date":"2021-09-08T10:59:54","date_gmt":"2021-09-08T15:59:54","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/what-is-an-s-corporation.html"},"modified":"2025-10-30T14:24:00","modified_gmt":"2025-10-30T19:24:00","slug":"what-is-an-s-corporation","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/what-is-an-s-corporation.html","title":{"rendered":"What is an S Corporation?"},"content":{"rendered":"\n
\n

What is an S Corporation?<\/h1>\n\n
\n
\n By Tim Kelly, J.D.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n

Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

\n
\n
\n

Key Takeaways<\/h2>\n

An S-corporation (S-corp) is a special tax election for corporations and limited liability companies<\/span> (LLCs). S corporation status<\/span> allows the owners to avoid double taxation<\/span> by having the corporate profits pass through to the S corp owners<\/span>\u2019 individual tax returns.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

Corporations offer limited liability protection<\/span> for their shareholders. If the business is sued or is in debt, the shareholders\u2019 personal assets<\/span> are not at risk. However, a significant drawback is double-taxation<\/span> where profits are taxed at the corporate level<\/span> and then again once the owners receive distributions<\/span>. A company may choose to change their default status of a C corp<\/span> to an S corp.<\/p>\n

Business entities<\/span> taxed as\u00a0an S-corp do not pay a corporate income<\/span> tax<\/span><\/a>. Instead, the business\u2019s gains pass through to the owners, who must report those gains as income on their personal tax returns<\/span>. This pass-through taxation is similar to sole proprietorships<\/span> and partnerships.<\/p>\n

Aside from a few designated taxes for built-in gains and passive income<\/span>, the gains and losses of a company are assessed at shareholders\u2019 personal <\/span>income tax<\/span> rates<\/span>. Therefore,\u00a0S-corps avoid the double taxation<\/span> found in C-corporations<\/span><\/a> (C-corps<\/span>).<\/p>\n

Form your corporation with confidence with\u00a0our trusted partner LegalZoom.<\/a><\/i><\/b><\/p>\n

Key Takeaways<\/h3>\n