An S corporation (S-corp) is a federal tax designation that Congress created so small businesses could receive favorable tax advantages. An LLC (limited liability company) or corporation can elect S corporation status with the IRS, but there are requirements. To become an S-corp, you must set up payroll, have less than 100 shareholders, and only issue one class of stock.
How an S Corporation Works
An owner cannot register their business as an S corporation. They must first register the business as either an LLC or a corporation in the state it’s primarily doing business in.
