S corporations.
An eligible domestic corporation can avoid double taxation (once to
the corporation and again to the shareholders) by electing to be
treated as an S corporation. An S corporation generally is exempt from
federal income tax other than tax on certain capital gains and passive
income. Its shareholders include on their tax returns their share of
the corporation's separately stated items of income, deduction, loss,
and credit, and their share of nonseparately stated income or loss.
More information.
For more information on S corporations, see the instructions for
Form 2553, Election by a Small Business Corporation, and
for Form 1120S, U.S. Income Tax Return for an S Corporation.
Limited liability company.
A limited liability company (LLC) is an entity formed under state
law by filing articles of organization as an LLC. None of the members
of an LLC are personally liable for its debts. An LLC may be
classified for federal income tax purposes as either a partnership, a
corporation, or an entity disregarded as an entity separate from its
owner by applying the rules in regulations section 301.7701-3.
See the instructions for Form 8832, Entity Classification
Election, for more details.