LYCOS RETRIEVER 
S Corporation: S-Corporations
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An S-Corporation is a special kind of corporation. It has different tax benefits from a normal corporation (which is called a C-Corporation). For more information, you can read about the difference between C-Corporation and S-Corporation.
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Once you have established your corporation according to your state requirements, to convert from a C-Corporation to an S-Corporation, you must meet the same requirements as a newly formed corporation electing S-Corporation status. You must meet the requirements of a "small business corporation" which are, in general:
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LLCs have far fewer restrictions on membership than an S-Corporation has on shareholders. LLCs ... allow members to participate in management of the LLC without losing their protection from liability, whereas a limited partner in a limited partnership does not have this benefit.
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S-Corporations and LLCs function basically the same tax wise but differ in that LLCs are not required to have a certain amount of members (shareholders). The members do not have to be U.S. citizens or a Permanent Resident Aliens, in fact, the members may be Individuals, Corporations, Partnerships, other LLCs and even Non-Resident Aliens. Also, there is no restrictions on the LLC’s class or classes of member interest (stock).
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The chance of any small business owner having his or her S corporation randomly audited is tiny. About 3 million S-corporation tax returns are filed annually. So, an extra 5,000 audits amounts to a 0.16% audit rate.
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There are some limitations on S-Corporations: they cannot deduct some expenses like health insurance, travel, entertainment, etc. that normal corporations can. Also, they are restricted to 75 shareholders or fewerand those shareholders must be U.S. Citizens.
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S-Corporations