An S Corporation is a special type of corporation that meets specific Internal Revenue Code requirements, allowing it to be taxed as a pass-through entity, which means that income, losses, deductions, and credits flow through to the shareholders' personal tax returns. This structure provides the limited liability of a corporation while avoiding double taxation on corporate income, making it an attractive option for small businesses. The election to be treated as an S Corporation can influence its capital structure and tax implications, including restrictions on built-in gains and passive income.
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