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S-corporations have favorable tax treatment because they are designed to avoid double taxation on corporate income. In this structure, a qualifying firm does not pay corporate income taxes at the corporate level; instead, the income, losses, deductions, and credits pass through to the shareholders, who report them on their individual tax returns. This allows S-corporations to be taxed only at the shareholder level, which can result in a lower overall tax burden for the owners, particularly if corporate profits are retained within the business.

Additionally, S-corporations must meet certain criteria to maintain this status, such as having a limited number of shareholders and only issuing one class of stock. This ensures that the tax benefits are used primarily by smaller businesses rather than larger corporations that might engage in corporate tax avoidance strategies. The other types mentioned do not provide the same tax advantages or have different tax implications, making S-corporations unique in this regard.