An S corporation, for United States federal income tax, is a closely held corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any income taxes.

Is an LLC and an S corp the same thing?

An LLC is a type of business entity, while an S corporation is a tax classification. ... (You can form an LLC and choose to be taxed as an S corporation, but your business can also operate under the default taxation system for LLCs.)

What does an S corp do?

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. ... S corporations are responsible for tax on certain built-in gains and passive income at the entity level.