Form 1120-S vs. Form 1120

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Form 1120-S vs. Form 1120 at a Glance

Form 1120-S is filed by eligible S corporations, while Form 1120 is filed by C corporations to report their corporate income, deductions, and tax liability.

  • Form 1120-S: Used by eligible S corporations with an S corporation election. Income, deductions, and credits generally pass through to shareholders.
  • Form 1120: Used by C corporations to report corporate taxable income and federal income tax at the entity level.
  • Ownership: S corporations generally have a 100-shareholder limit and restrictions on eligible shareholders and stock classes, while C corporations generally have no federal limit on the number or type of shareholders.
  • Which Form to File: The correct form depends on the corporation's tax classification, S corporation eligibility, ownership structure, and tax election.

Form 1120-S and Form 1120 are both corporate tax returns filed with the IRS, but they apply to different business structures. Form 1120-S is used by S Corporations with pass-through taxation, while Form 1120 is filed by C Corporations that pay corporate income tax directly.

Understanding the differences helps businesses choose the right tax structure and meet IRS filing requirements.

Table of Contents

  • S Corporation vs C Corporation
  • Major Differences Between Form 1120-S and Form 1120
  • Eligibility Requirements
  • Taxation: Pass-Through vs Double Taxation
  • Reporting and Filing Requirements
  • Determining Which Form to File
  • File Your Corporate Tax Return Effortlessly

S Corporation vs C Corporation

S CorporationC Corporation
Form 1120-S
Filed by corporations or LLCs that have elected S Corporation status by filing Form 2553.
  • Income, losses, and credits pass through to shareholders.
  • Shareholders receive Schedule K-1 to report their share of income, deductions, and credits.
  • Shareholder employees can receive a salary separate from distributions.
  • Limited to 100 shareholders and generally allows only one class of stock.
 Form 1120
Filed by corporations that are taxed as C Corporations by default or have not elected S Corp status.
  • Corporation pays taxes on its income at the corporate level.
  • Shareholders may receive dividends, which can be taxed separately from corporate income.
  • Shareholders are not treated as employees unless they provide services to the corporation.
  • No limit on the number or type of shareholders.

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Major Differences Between Form 1120-S and Form 1120

FeatureForm 1120-S (S Corp)Form 1120 (C Corp)
Taxation Pass-through: Income/losses reported by shareholdersDouble taxation: Corporation pays tax; shareholders taxed again on dividends
Ownership Limited to 100 shareholders; all must be U.S. personsNo restrictions; unlimited shareholders (U.S. and foreign)
Filing Forms 1120-S + Schedule K-1 for each shareholderOnly IRS 1120 Form
Losses Can pass through to shareholders (limits apply)Remain in the corporation; only usable by entity
Stock Only one class of stock allowedMultiple classes of stock allowed
Eligible Entities Can pass through to shareholders (limits apply)Remain in the corporation; only usable by entity
Foreign Shareholders Not permitted Permitted

Eligibility Requirements

To file Form 1120-STo file Form 1120
Must be a domestic corporation or LLC that elected corporate taxationDomestic and foreign corporations taxed as C Corporations.
Must file Form 2553 and receive IRS approval.No special election required.
No limit on the number of shareholders.Limited to 100 shareholders.
Individuals, corporations, partnerships, trusts, and foreign investors are generally allowed.Shareholders must generally be U.S. citizens or resident individuals, certain trusts, or estates.

Taxation: Pass-Through vs Double Taxation

QuestionS Corps (Form 1120-S)C Corps (Form 1120)
Who pays tax on profits? Shareholders, directly on their personal returnsThe corporation, on its own return
Is there a corporate-level tax? No, income passes through untaxed at the entity levelYes, the corporation pays federal tax on taxable income
Are dividends taxed again? No second layer of taxYes, dividends are taxed again at the shareholder level

Reporting and Filing Requirements

S CorporationsC Corporations
Form 1120-S, filed annuallyForm 1120, filed annually
Schedule K-1 prepared for each shareholder for Reporting No Schedule K-1 is issued to shareholders.
Additional state returns filed if requiredSeparate state and local corporate returns may apply depending on location

Determining Which Form to File

Choose Form 1120-S If...Choose Form 1120 If...
Your business qualifies for S Corporation status. You need flexible ownership or plan to attract investors.
You want pass-through taxation to avoid double taxation.You plan to retain and reinvest profits in the corporation.
You want profits and losses to pass through to shareholders.You expect to have foreign shareholders or multiple classes of stock.
Your business will have 100 or fewer eligible shareholders.Your business may have more than 100 shareholders or ineligible owners.
Ownership will remain with eligible U.S. shareholders.You need fewer ownership restrictions and greater fundraising flexibility.

File Your Corporate Tax Return Effortlessly

Ensure your corporation’s tax filing matches your business structure, growth plans, and investor strategy. Reviewing eligibility and tax implications is essential for making the best choice—and filing the correct form helps you avoid costly errors and maximize tax advantages.

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