An S-Corporation is a tax designation, not a separate business structure, that allows eligible corporations and LLCs to pass income directly to shareholders' personal tax returns, avoiding corporate-level taxation. The key financial benefit for self-employed individuals is the ability to reduce self-employment tax. As an S-Corp owner, you pay yourself a reasonable salary (subject to payroll taxes) and take additional profits as distributions, which are not subject to the 15.3% self-employment tax. For example, if your business earns $120,000, you might pay yourself a $70,000 salary and take $50,000 as a distribution. Only the $70,000 is subject to payroll taxes. The trade-off is added complexity: S-Corps require payroll processing, separate business tax filings (Form 1120-S), and strict IRS rules around reasonable compensation.