An S Corporation is not a legal entity but rather a tax structure. This means a qualifying LLC or a Corporation can choose to elect this tax structure. The S Corporation itself does not pay federal income tax. Instead, the business income, losses, deductions, and credits pass through to the shareholders' personal tax returns. Shareholders then, are taxed at their individual income tax rates, avoiding the double taxation that occurs with the tax structure of a C Corporation. Usually suited for small businesses with 100 shareholders or less.