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 New York, as in other states, S corporations are recognized as pass-through entities for federal tax purposes, meaning that income, losses, deductions, and credits are passed through to shareholders instead of being taxed at the corporate level. This structure avoids the double taxation that can occur with C corporations, where both the corporation's profits and the shareholders' dividends are taxed. To qualify as an S corporation in New York, the corporation must be a domestic entity with allowable shareholders that include individuals, certain trusts, and estates, but not partnerships, other corporations, or non-resident alien shareholders. The corporation is limited to 100 shareholders and must have only one class of stock. Certain types of corporations, such as financial institutions, insurance companies, and domestic international sales corporations, are ineligible for S corporation status. New York State recognizes the federal S corporation election and does not require a separate state election. However, New York imposes a franchise tax on S corporations, which is a tax on the privilege of doing business in the state. The specifics of this tax can vary, so it is important for S corporations in New York to consult with an attorney or a tax advisor to ensure compliance with all state tax obligations.