What is an “S” Corporation?
An S Corporation, also known as “S Corp,” basically means “small business corporation.” This means that you file under Subchapter S, from Chapter 1 of the Internal Revenue Code. For federal tax purposes, the IRS treats an S Corp like a pass-through entity. This is done through an election made with the IRS. It is essentially a closely held corporation.
Thus, S corporations, in general, do not pay income taxes. Instead, the income and/or losses is divided between the shareholders. Then, shareholders have to report their income (or losses) in their individual income tax returns.
So, an S Corp is different from the traditional C Corp because an S Corp’s taxation is similar to that of partnerships. Filing as a corporation with shareholders helps a company take advantage of the corporate form’s beneficial features. You receive your own individual tax return, but the business won’t itself be taxed.
To qualify to file as an S Corp, there are certain qualifications. Your corporation must have:
- no more than 100 shareholders
- only individuals as shareholders
- no shareholders that are nonresident aliens
- only one class of stock
Let San Diego Truck Insurance Help You File for S Corporation
At San Diego Truck Insurance, we understand how difficult the legal requirements for running a business can be. It is important to know the best way to file your corporation. So, let us help you better understand the qualifications and regulations for filing. We can help you determine if you qualify to file as an S Corp, and assist you in the process.
Simply speak with one of our agents about your commercial auto business and they’ll walk you through the process. San Diego Truck Insurance makes the legal side of things easy for you – so you can get back to business.