An "S Corporation", like the C Corporation, is a legal entity separate and distinct from the Corporation's owners or shareholders. The main distinction between an S Corporation and a C Corporation is tax treatment. A "C" corporation pays both corporate taxes as well as taxes when monies are paid to its members or shareholders. With “S" Corporations generally only shareholders pay taxes on distributions such as salary and bonuses.

The main benefit of an S Corporation, from a legal perspective, is the general avoidance of personal liability of its shareholders and directors.

Some additional advantages of a S Corporation are as follows:

• Changes in ownership are easily accomplished without disturbing the corporation's ability to conduct business;
• Generally speaking, the S corporation pays no income taxes and corporation income or loss is passed through directly to the stockholders;
• Certain S corporation business expenses may be tax-deductible;
• Regular shareholder meetings improve communication amongst owners and can provide guidance for effective management;
• Access to financing and credit may be improved.