An S Company is a type of corporation (Note: The “S” in S Corporation refers to tax code subchapter S). S Corporations are similar to C Corporations, however they are not taxed as a distinct company like C Corporations. Instead, a S Corporation's revenue is "passed through" to the personal income of its owners (shareholders) in proportion to their ownership stake. Forming a conventional C Corporation and then submitting IRS Form 2553 (The Subchapter S Election) for federal recognition of S Corporation tax status results in the formation of a S Corporation. While a S Corporation has many of the same characteristics as a C Corporation, there are several key distinctions.
While a S Corporation and an LLC have comparable pass-through taxation, a S Corporation may have a benefit over an LLC when it comes to self-employment taxes. S Corporation shareholders' remuneration (salary and bonuses) is subject to self-employment tax, but not the earnings automatically assigned to them as a shareholder. This may be a sophisticated and aggressive tax technique, so make sure to check with the right tax and legal experts before pursuing it.