What is an "S" corporation and what are its tax implications?

What is an "S" corporation and what are its tax implications?

Gregg Wind (Partner, Wind Bermer Hockenberg, LLP) gives expert video advice on: Can starting a business decrease my taxes? and more...

An S corporation is very different from a C corp, and the biggest difference is that the S corporation doesn't, by itself, pay tax- it's what we call a "pass-through entity." The income is passed through to the shareholders, sometimes corporate, sometimes individual, and the tax is assessed at that level. Certain states, as in California, where I am, assess a small tax on S corp income, but generally, S corporations are pass-through entities.The other significant difference between S and C corporations is that S corporations limit the number of shareholders that are allowable, whereas C corporations do not. In 27, the limitation on S corp shareholders is 75.