The benefit of electing S corp. status is avoiding what is commonly called âdouble taxation."A C corporation is required to file Form 1120, U.S. Corporation Income Tax Return. Any profits will be taxed at the corporate tax rate. If any portion of those profits are passed on to the shareholders as dividends, each shareholder will need to report his or her share on their individual Form 1040, along with Schedule B, Interest and Ordinary Dividends.Therefore, the profits are taxed once to the corporation, then taxed a second time to the shareholders if any profits (dividends) are distributed to the shareholders. This is known as âdouble taxation."An S corporation is required to file Form 1120S, U.S. Income Tax Return for an S Corporation. Unlike the C corp., no corporate tax is assessed on any profits reported on Form 1120S. Instead, the profits are divided among the shareholders, according to the number of shares held by each shareholder.Each shareholder will then need to report his or her share of the profits on their individual Form 1040, along with Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. However, the profits are taxed to the shareholders even if no dividends are distributed to them.