An S Corporation is a corporation whose income and losses are passed down to the individual shareholder and are reflected on their individual tax returns. The shareholders must have a limited number of shareholders and only certain individuals and entities can own stock in an S Corporation.
S Corporations may issue voting and non-voting stock. However, unlike limited liability companies (LLCs), and C Corporations they do not allow for preferred and common ownership. Most businesses start out as S Corporations or limited liability companies because of the single level of taxation and the limited liability provided. S Corporations may convert to C Corporations or limited liability companies.
