A corporation is a state chartered organization which acts as a separate legal entity. Corporations may elect to file as a C-Corporation or an S-Corporation when filing with IRS.
C-Corporation: It is owned by one or more shareholders whose losses will be limited to the amount of their respective investment. C-Corporations pay the corporate tax rate.
S-Corporations: Taxed as a partnership. Income and deductions flow through the corporation to the shareholders. Shareholders pay the individual tax rate for both state and federal taxes. In addition, the state imposes an additional tax on S-Corporations.