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.

To qualify for S corporation status, the corporation must meet the following requirements:

(1) Be a domestic corporation;
(2) Have only allowable shareholders;

• May be individuals, certain trusts, and estates and
• May not be partnerships, corporations or non-resident alien shareholders

(3) Have no more than 100 shareholders;
(4) Have only one class of stock;
(5) Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation signed by all the shareholders.

States impose tax laws and regulations for corporate income and distributions, some of which may be directed specifically at S Corporations. Some but not all states recognize a state tax law equivalent to an S corporation, so that the S corporation in certain states may be treated the same way for state income tax purposes as it is treated for Federal purposes. A state taxing authority may require that a copy of the Form 1120S return be submitted to the state with the state income tax return.

Some states such as New York and New Jersey require a separate state-level S election in order for the corporation to be treated, for state tax purposes, as an S corporation.

S Corporation needs to file Form 1120-S to report the income, gains, losses, deductions, credits, etc. Form 1120-S generally must be filed by March 15 of the year immediately following the calendar year covered by the return or, if a fiscal year (a year ending on the last day of a month other than December) is used, by the 15th day of the third month immediately following the last day of the fiscal year. The corporation must complete a Schedule K-1 for each person who was a shareholder at any time during the tax year and file it with the IRS along with Form 1120S. The second copy of the Schedule K-1 must be mailed to the shareholder.

Reference: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations

See also:
C Corporations vs. S Corporations