A corporation or LLC that has elected pass-through taxation with the owner treated as an employee. Often used to reduce self-employment tax on business profit.
The S election trades self-employment tax savings for payroll, a separate return, and a reasonable salary requirement. It works best for consistently profitable owner-operated businesses, typically above the point where savings exceed the added cost. Illinois adds a 1.5 percent personal property replacement tax on S corporation net income.
No. Shareholders must generally be US individuals, certain trusts, or estates, and there can be no more than 100 of them.
Last reviewed September 10, 2026. Tax rules change; confirm current law before acting.
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