Definition of 'Form 1120S'
A tax document used to report the income, losses and dividends of S corporation shareholders; it is an S corporation's tax return. Form 1120S is part of the Schedule K-1 document. It is prepared for each individual shareholder and identifies the percentage of company shares owned by the individual for the tax year.
For a partnership, Form 1065 is submitted instead of Form 1120S.
Investopedia explains 'Form 1120S'
The IRS uses the ownership percentage to allocate how much profit and loss should be assigned to an individual shareholder. This is easily calculated if the shareholder doesn't see a change in the percentage during the year, but if shares are bought, sold or transfered during the course of the year then profit and loss has to be pro-rated on a per-share basis.