Business structure
C corp vs S corp: taxes, owners, forms and deadlines side by side
How the IRS taxes a C corporation and an S corporation, who can own each, which returns each files, the March and April due dates and how an S election starts and ends. Every fact from IRS pages.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
The IRS treats a C corporation as a separate taxpaying entity that files Form 1120: its profit is taxed when earned and taxed again to shareholders when paid out as dividends. An S corporation is a corporation that elects on Form 2553 to pass its income, losses, deductions and credits through to its shareholders, who pay tax at individual rates, and it files Form 1120-S. To elect, it must be domestic, have no more than 100 shareholders, allow only individuals, certain trusts and estates as owners, and have one class of stock.
C corp vs S corp at a glance
Both are corporations. The difference is how the IRS taxes them and who is allowed to own them. Unless exempt under section 501, every domestic corporation files a federal income tax return, whether or not it has taxable income. It files Form 1120 unless it is required, or elects, to file a special return such as Form 1120-S.
Scroll sideways to see all columns.
| C corporation | S corporation | |
|---|---|---|
| Who pays income tax | The corporation, then shareholders again on dividends | Shareholders, at their individual rates (with entity-level tax on certain built-in gains and passive income) |
| How you get it | File Form 1120 as a domestic corporation (an LLC files Form 8832 first) | File Form 2553, signed by all shareholders |
| Shareholder limit | Not limited by the S corporation tests | No more than 100 |
| Who can own shares | Not limited by the S corporation tests | Individuals, estates, certain trusts and certain exempt organizations. No partnerships, corporations or nonresident aliens |
| Classes of stock | Not limited by the S corporation tests | One class (differences in voting rights are disregarded) |
| Federal income tax return | Form 1120 | Form 1120-S, with a Schedule K-1 for each shareholder |
| Due date, calendar year | 15th day of the 4th month after year end | 15th day of the 3rd month after year end (March 16, 2026 for 2025 returns) |
| E-file required | If it files 10 or more returns of any type in a calendar year | Same 10-return rule |
Double taxation vs pass-through
The IRS says a C corporation is recognized as a separate taxpaying entity. It conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders. Its profit is taxed to the corporation when earned and then taxed to the shareholders when distributed as dividends. The IRS calls this a double tax.
Two more C corporation rules follow from that. The corporation gets no deduction when it pays dividends. And shareholders can't deduct any loss of the corporation.
An S corporation passes its income, losses, deductions and credits through to its shareholders for federal tax purposes. Shareholders report that flow-through on their personal returns and are taxed at their individual rates, which lets the S corporation avoid double taxation on corporate income.
An S corporation can still owe tax itself. The IRS says it is responsible for tax on certain built-in gains and passive income at the entity level.
Who can be an S corp
A C corporation has none of the limits below. An S corporation must meet every one of them, according to the Instructions for Form 2553.
- It is a domestic corporation, or a domestic entity eligible to elect to be treated as a corporation.
- It has no more than 100 shareholders. A married couple and their estates can count as one shareholder, and so can all members of a family and their estates.
- Its only shareholders are individuals, estates, exempt organizations described in section 401(a) or 501(c)(3), or certain trusts.
- It has no nonresident alien shareholders.
- It has only one class of stock, disregarding differences in voting rights. Generally that means all outstanding shares give identical rights to distribution and liquidation proceeds, so voting and nonvoting shares can sit in one class.
- It isn't an ineligible corporation, such as a bank or thrift using the reserve method for bad debts, an insurance company taxed under subchapter L, or a DISC or former DISC.
- Every shareholder consents to the election.
Which IRS forms each one files
A C corporation files Form 1120. An LLC can file Form 1120 only if it has filed Form 8832 to be treated as a corporation, and it attaches a copy of Form 8832 to the return for the year of the election. Form 1120-X corrects a filed Form 1120.
An S corporation files Form 1120-S if it elected S status on Form 2553, the IRS accepted the election, and the election is still in effect. It gives each shareholder a Schedule K-1. Shareholders report their share on Form 1040 or 1040-SR with Schedule E, and use Form 1040-ES for estimated tax.
Both file the same employment tax returns when they pay wages: Form 941, or Form 943 for farm employees, for Social Security, Medicare and income tax withholding, and Form 940 for federal unemployment tax.
Deadlines, estimated tax and penalties
Form 1120 is generally due by the 15th day of the 4th month after the tax year ends. A corporation with a fiscal year ending June 30 files by the 15th day of the 3rd month instead. Form 1120-S is due by the 15th day of the 3rd month after year end, which was March 16, 2026 for calendar-year 2025 returns because March 15 fell on a Sunday.
A corporation can request an automatic extension of time to file with Form 7004, generally filed by the return's regular due date.
A C corporation that expects its total tax for the year, less credits, to be $500 or more pays estimated tax in installments due by the 15th day of the 4th, 6th, 9th and 12th months of its tax year. Corporations must make all federal tax deposits by electronic funds transfer, through EFTPS or the corporation's IRS business tax account.
For a return filed late, the Form 1120 penalty is 5% of the unpaid tax for each month or part of a month, up to 25%. For returns required to be filed in 2026 that are more than 60 days late, the minimum is the smaller of the tax due or $525, and the 1120-S instructions state the same minimum. Paying late adds ½ of 1% of the unpaid tax per month, up to 25%.
Switching between C and S status
A C corporation becomes an S corporation by filing Form 2553 no more than 2 months and 15 days after the start of the tax year the election should take effect, or at any time during the tax year before it.
An S election stays in effect until it ends. It terminates automatically if the corporation stops meeting the small business corporation tests, or if for 3 consecutive tax years it has accumulated earnings and profits and gets more than 25% of its gross receipts from passive investment income. Shareholders holding more than 50% of the issued and outstanding shares, including nonvoting stock, can also revoke it.
After a termination, the corporation can elect S status again only with IRS consent for any tax year before the fifth tax year after the first tax year the termination took effect.
Aldro's team prepares and files Form 1120 and Form 1120-S, with their state returns, for one flat yearly price that covers everything tax.
Worked example
Take a calendar-year corporation that has filed Form 1120 as a C corporation and wants to be an S corporation starting January 1. The IRS example in the Form 2553 instructions says the 2-month period ends February 28 (29 in leap years) and 15 days after that is March 15. So it can file Form 2553 any time from January 1 of its last C corporation year through March 15 of its first S corporation year. Until the switch, its Form 1120 is due on the 15th day of the 4th month after year end, which is April 15 for a calendar year, and if it expects $500 or more of tax it pays estimates by April 15, June 15, September 15 and December 15. Once it is an S corporation, its Form 1120-S is due a month earlier, on the 15th day of the 3rd month, and each shareholder gets a Schedule K-1.
Common questions
What is the main tax difference between an S corp and a C corp?
A C corporation's profit is taxed to the corporation and again to shareholders as dividends. An S corporation passes income, losses, deductions and credits to shareholders, who pay at individual rates, apart from entity-level tax on certain built-in gains and passive income.
Can an S corp have more than one class of stock?
No. It can have only one class, but differences in voting rights are disregarded. Generally, all shares must give identical rights to distribution and liquidation proceeds.
Can a nonresident alien or another company own S corp shares?
No. The IRS says S corporation shareholders may be individuals, certain trusts and estates, and may not be partnerships, corporations or nonresident alien shareholders.
When are S corp and C corp returns due?
Form 1120-S is due on the 15th day of the 3rd month after year end (March 16, 2026 for 2025 calendar-year returns). Form 1120 is generally due on the 15th day of the 4th month, or the 3rd month for a June 30 year end.
Can an LLC be a C corp or an S corp?
Yes. An LLC can file Form 1120 only after filing Form 8832 to be treated as a corporation. An eligible LLC that files Form 2553 is treated as a corporation from the election's effective date and doesn't also need Form 8832.
How does an S corp lose its election?
It ends automatically if the corporation stops qualifying, or after 3 straight years with accumulated earnings and profits and more than 25% of gross receipts from passive investment income. Owners of more than 50% of the shares can revoke it.
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- Your personal return. The owner’s personal return (1040 or T1) is included when it’s needed for the business income.
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- Extensions and reminders. Extensions (Form 7004 or 4868) and quarterly estimate reminders are included.
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- City and excise returns. City and local business tax returns, and state excise returns such as Washington B&O, are included in the yearly price.
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Sources
- IRS: Forming a corporation · checked October 31, 2026
- IRS: S corporations · checked October 31, 2026
- IRS: Instructions for Form 1120 · checked October 31, 2026
- IRS: Instructions for Form 1120-S · checked October 31, 2026
- IRS: Instructions for Form 2553 · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.