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The IRS defines a corporation as an entity formed under state law by the filing of articles of incorporation with the state. Articles of incorporation need to be date stamped (or file stamped) by the Secretary of State’s office in order to be official.

The IRS defines S corporations as corporations that elect to pass corporate income losses, deductions and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income.

The IRS code really doesn’t define LLCs. As such, the IRS allows them the flexibility to be taxed however you, the LLC owner, wants. You can choose C corporation, S corporation, partnership or, if one member, disregarded entity taxation. Your election will be filed on Form 8832.

The following is a quick comparison of federal tax requirements for traditional C corporations, S corporations and LLC entities.