Here is an interesting tidbit presented by the California Estate and Business Law Blog.

According to Turbotax the S Corporation has the lowest risk of audit for the various business entities.  Those audit risk percentages are:

S corporations   .19%

Partnerships     .26%

C Corporations    .71%

Sole Proprietorships     2.13%

But if you play by the rules it really should not matter which business entity you use.

Update on December 1, 2006:  See this article from Inc. Magazine which I spotted on the New York Small Business Law blog (thanks Imke) concerning the rise in S corporation audits.  Again, play by the rules and it won’t matter.