Short answer
S and C identify US federal corporate tax statuses, not two separate incorporation processes in this IRS guidance. S corporations elect shareholder pass-through treatment; the IRS identifies C corporations with Form 1120 and S corporations with Form 1120-S. S status has eligibility restrictions and does not eliminate every entity-level tax. 1 2
On this page
At a glance
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| Question | S corporation | C corporation |
|---|---|---|
| Federal return? | Form 1120-S | Form 1120 |
| Pass-through treatment described here? | Income, losses, deductions, and credits | Not detailed in these excerpts |
| Election to S status? | Form 2553 required | Starting status in the IRS change procedure |
| Eligibility restrictions? | Specific shareholder and stock limits | C eligibility not detailed here |
These comparisons concern federal taxation and filing, not state formation requirements. 1 2
What each thing is
An S corporation passes specified tax items through to shareholders. They report income and losses on personal returns and are taxed at individual rates. C status is the other corporate filing status addressed by the IRS transition guidance; its return is Form 1120. 1 2
Key differences
Eligibility is a major boundary. The IRS S corporation page, marked updated June 11, 2026, requires a domestic corporation, no more than 100 shareholders, and one stock class. Allowable owners include individuals, certain trusts, and estates—not partnerships, corporations, or nonresident aliens. Certain corporation categories are also excluded. 1
How to tell them apart
Check federal election acceptance and the applicable return: Form 1120 points to C filing status; Form 1120-S points to S filing status. The limit is important: an attempted Form 1120-S filing alone does not establish an accepted S election when Form 2553 was not timely filed. 2
Where they overlap
The IRS describes a corporation moving from C to S filing status, using an election and a transition between returns. That continuity is why these labels should not be read as evidence of two separate state incorporation processes. The excerpts do not describe state formation law. 2
Edge cases
Pass-through does not mean an S corporation can never owe entity-level tax. The IRS identifies taxes on certain built-in gains and passive income. Its statement about avoiding double taxation therefore should not become a promise that every item escapes corporate-level taxation. 1
Why the distinction exists
The distinction identifies an elected federal tax treatment with conditions attached. Form 2553 must be signed by all shareholders, and the IRS change procedure includes notice of acceptance or nonacceptance. Eligibility, election acceptance, and the applicable return are connected but distinct questions. 1 2
Common misconceptions
Being small is not itself an S election, and filing an S return is not a substitute for the required election. Late-election relief may be available under specified procedures, but the IRS guidance does not treat that relief as automatic. 1 2
Examples
Hypothetical eligibility case: a domestic corporation with 101 shareholders exceeds the listed S limit, regardless of its preference for pass-through treatment. Hypothetical filing case: a C corporation submits Form 2553 and receives acceptance; the IRS procedure then calls for its last C return and its S return. 1 2