However, generally speaking, if you make the election all of the profits and losses of the corporation will be passed onto the individual tax returns of the shareholders in proportion to their shareholdings. Generally speaking, the corporation will not be treated as a taxable entity. Again, speaking very generally, the reason this election is normally made is to avoid being taxed twice for the income of the corporation. Where the election is not made, the corporation will be a taxable entity and will pay tax on it's net income at corporate income tax rates. S Corporations are widely used by small businesses.
S corporations have many benefits.
S Corporations are taxed similar to partnerships. S Corporation provide limited liability to owners.