<Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> An S corporation, for United States federal income tax purposes, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code . In general, S corporations do not pay any income taxes . Instead, the corporation's income or losses are divided among and passed through to its shareholders . The shareholders must then report the income or loss on their own individual income tax returns . </P> <P> S corporations are ordinary business corporations (or, in some cases, limited liability companies or even partnerships) that elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes . The S corporation rules are contained in Subchapter S of Chapter 1 of the Internal Revenue Code (sections 1361 through 1379). Congress, acting on the Department of Treasury's suggestion of 1946, created this chapter in 1958 as part of a larger package of miscellaneous tax items . S status combines the legal environment of C corporations with U.S. federal income taxation similar to that of partnerships . </P>

Who pays the taxes within an s corporation