The term "S Corporation" refers to a corporation that has made an election under Subchapter S. The election allows a corporation to achieve a form of pass-through tax treatment similar to that available to unincorporated entities under the check-the-box regulations. In other words, S Corporations avoid the double taxation that corporations normally face. To qualify, a corporation must not (1) have more than 100 shareholders, (2) have as a shareholder a person other than an individual (e.g., shareholders that are corporations or partnership are not permitted), (3) have a nonresident alien as a shareholder, or (4) have more than one class of stock. A S Corporation is distinguished from a C Corporation, which is taxed under the ordinary corporate tax rules of Subchapter C.
The S corporation is not different from a C corporation under state corporate law. The Subchapter S designation is the result of an election under federal income tax law, and does not affect the corporate law status of the corporation.