An S corporation is a regular corporation that opts to tax its profits at the personal income tax level. An S corporation must prepare and file an income tax return, but itself pays no tax (if it complies with all of the technical and complex rules of the Federal law). Each shareholder pays taxes on his/her share of S corporate income on his or her individual tax return. Owner-employees of an S corporation are treated like partners for purposes of employment and benefits
An S is set up in the same manner as a regular corporation and then files for IRS approval (and sometimes state approval) after hurdling through several IRS regulations.
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