Tax treatment of S corporations

Essentially, a Sub-chapter S corporation is a tax filing entity, but not a tax-paying entity. As with partnerships and limited liability companies (LLCs), any income and loss pass through to owners, and their allocable share is reported by S corporation shareholders on their individual income tax returns.

State laws vary on the tax treatment of S corporations for state income tax purposes. Be sure to check the laws of any state in which you do business.