Which of the following best describes an S corporation?

An S corporation is specifically designed to avoid the issue of double taxation that typically affects C corporations. In a C corporation structure, income is taxed at the corporate level and again at the individual level when distributed as dividends to shareholders. An S corporation, on the other hand, allows income, losses, deductions, and credits to "pass through" directly to the shareholders, who then report these items on their personal income tax returns. This mechanism enables the S corporation to avoid the double taxation usually associated with corporate income, making option C the most accurate description.

The other options would not accurately describe the S corporation due to their fundamental characteristics. The first option describes a C corporation, which does face double taxation. The second option confuses the S corporation with partnerships, which have different tax treatment and structural features. The final option refers to a non-profit organization, which operates entirely differently from a profit-generating entity like an S corporation. Thus, option C stands out as the only one that correctly explains the unique tax structure of an S corporation.