S corporation

A U.S. federal tax status elected by an eligible domestic corporation or other qualifying entity. Income, losses, deductions, and credits generally pass through to shareholders for federal tax purposes.

S corporation in practice

Hypothetical: an eligible U.S. family-owned corporation elects S status. Its shareholders generally report their shares of income or loss on their returns. The election does not eliminate every entity-level tax: certain built-in gains and passive income can still be taxed at the corporation level.

Reference

Tax reference: IRS: S corporations.

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