An “S corporation” is essentially a traditional corporation (C corp or professional corporation) that elects pass-through tax status. It is important to note, however, that an LLC can also elect to be taxed as an S corporation. To make this election, the entity would notify the IRS by filing Form 2553 with the IRS (the S Election).
Once the corporation or LLC elects to be treated like and taxed as an S corporation (i.e. files form 2553 with the IRS), the entity will pass corporate income, losses, deductions, and credits through to its owners for federal tax purposes. The owners of an entity that elects to be treated as a S corporation report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This flow-through feature means the traditional corporation can avoid double taxation on the corporate income.