Could a single owner set up as an s-Corp file schedule C instead? Or after they select S-Corp file as 1120s? I just don't see the benefits of the extra work..

A S-Corp's activity does not go on schedule C. You need to prepare a 1120S which will provide a K-1 to the owner.

What can I do if the client did not himself a salary (w2)? Will he get penalized.. He is the only owner and the only worker

Yes. The client will get penalize if the IRS determines that the scorp purposely attempted to avoid payroll tax.

The IRS may require payment of employment taxes plus penalties of up to 100% of the payroll tax plus negligence penalties.

Yes to the original question, but would lose any limitation on liability he has through the corp. there is no absolute requirement that the owner pay himself a salary. However, if he has been taking owner draws out of profits, the IRS may recharacterize it as salary and he'll have to pay FICA on it. You should help him determine a reasonable salary, pay FICA on that, and then any distributions on top of that would be subject only to ordinary income. Having that salary ceiling for FICA is a primary benefit of the S Corp over sole prop or partnership.

@PwC , that was exactly what I was thinking, can he pay himself a reasonable salary and then pay the payroll taxes at the end of the year.. Or does he has to submit a w2 ?

Frankly not sure. I had a client that did it that way. Still a w-2, but took care of the payroll in one go at the end of the year rather than periodic deposits. I was working on more pressing issues for him though, so I didn't really research the propriety of that method. I'm sure you can find the answer in the regs though.