S corporations (also known as Subchapter S corporations) are 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 at the entity level.
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
• Have only allowable shareholders
o may be individuals, certain trusts, and estates, and
o may not be partnerships, corporations, or non-resident alien shareholders
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible corporation (i.e., certain financial institutions, insurance companies, and domestic international sales corporations).

In Pennsylvania, S corporations are recognized similarly to how they are at the federal level. An S corporation is a corporation that has elected a special tax status with the Internal Revenue Service (IRS) to have its income, losses, deductions, and credits flow through to shareholders' personal tax returns. Consequently, shareholders are taxed at their individual income tax rates, avoiding the double taxation that typically applies to corporate income. To be eligible for S corporation status, a corporation must be a domestic entity, restrict its shareholders to allowable individuals, certain trusts, and estates (excluding partnerships, corporations, and non-resident alien shareholders), have no more than 100 shareholders, maintain only one class of stock, and not fall into the category of ineligible corporations. In Pennsylvania, S corporations must also file a PA-20S/PA-65 S Corporation Information Return, and they are subject to state tax requirements that may include the Corporate Net Income Tax or the Capital Stock/Foreign Franchise Tax, depending on specific circumstances. It's important for corporations considering S corporation status in Pennsylvania to consult with an attorney or a tax advisor to ensure compliance with both federal and state tax laws.