An S Corporation is a special type of corporation that allows income, losses, deductions, and credits to pass through to shareholders for federal tax purposes. This means that the corporation itself does not pay federal income tax; instead, shareholders report the income on their personal tax returns. To qualify, the corporation must meet specific requirements, including having no more than 100 shareholders and being a domestic entity. S Corporations are popular among small business owners because they provide limited liability protection, meaning personal assets are generally protected from business debts. Additionally, they can help avoid double taxation, which occurs when both the corporation and shareholders are taxed on the same income.