If an S corporation has income earnings for the year, no more than 25 percent of its gross receipts for the year may be generated by passive income. 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. I'm way back to do research as I'm confused between the business entity search process and the S-Corp process. Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income.
