While corporations and LLCs are both types of legal entities, an S-corp is a tax status (or tax designation) with certain added advantages and restrictions. The most important thing to know about S-corps when deciding between establishing your business and electing among various structures and tax statuses is that an S-corp is not actually a business structure. New business owners must face an oft-confusing set of choices around the labels S-corps, C-corps and LLCs. The key characteristic of an S-corp is its “pass-through” tax structure, which the IRS describes as passing “corporate income, losses, deductions and credits through to shareholders for federal tax purposes.” S-Corps, C-Corps and LLCs A corporation may elect “S” status if it meets the requirements of the subchapter. S-corp is a tax designation spelled out in subchapter “S” of the Internal Revenue Code.
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