ABA Family Legal Guide

Forming and Operating a Small Business

Types of Business Organizations

Corporations

How are S corporations taxed?

S corporations are taxed like partnerships. Except in a limited number of circumstances, an S corporation does not itself pay any taxes. Rather, the income and the deductions generated by the S corporation are passed through to the shareholders, who report their share on their individual tax returns.

The basic eligibility requirements are that the corporation be a domestic corporation and