How to form an S-corporation for Transportation

Introduction

In this article, we’ll cover the steps to form an S-corporation for transportation. We’ll go over how to name your company, how to get a tax ID number, what type of business entity you should choose, and everything else you need to know.

You must be actively engaged in the business

To form an S-corporation, you must have the ability to make decisions about the business, and spend at least 80 hours a year on it. You must be actively engaged in the business to completely look after it well and manage it.

If you don’t meet this requirement, then your corporation won’t qualify as an S-corporation.

You have to have reasonable compensation

The IRS defines reasonable compensation as a salary, not a profit distribution. Your S-corporation must pay you at least $600 per year in compensation, which is paid out in equal installments throughout the year. If your business generates a profit, it will be reported on Form 1120S and taxed at corporate rates instead of under the personal tax schedule that applies to individual taxpayers.

To form an S-corporation, you must file Form 2553 with the IRS. You’ll also need to file Form 8832 with the IRS once your corporation is formed. This form allows you to elect S-corporation status for your business and specifies how many shares of stock are in your corporation.

All of your income should flow through the S-Corp without being taxed twice

An S-corporation is a good choice for companies that have owners who want to be taxed as if they were employees, but who also want to own and control their businesses. This means you can avoid double taxation on the profits of your business by setting up an S-corporation structure.

If your business generates a loss, it can be used to offset other income. For example, if you’re a doctor with another job that brings in $100,000 per year in salary and your S-corporation loses $50,000 one year, then the IRS will allow you to deduct $50,000 from your other income for tax purposes. The primary benefit of an S-corporation is that it allows you to pay yourself a salary and file your taxes as an employee, but still control your company. This can be especially useful if you are the only employee and do not want to pay self-employment taxes.

 There is a limitation on fringe benefits

As a truck driver, you can receive a variety of fringe benefits, including medical care and long-term disability insurance. However, there are to limits these benefits as well.

There are two ways to determine if a fringe benefit is taxable:

• Excess Fringe Benefit Method — the employer may use this method when an employee receives more than $1,050 worth of taxable non-cash items from them each month. They will report the value of all non-cash gifts or other forms of compensation that exceed $1,050 in any calendar month as wages on their W2 form for that employee at the end of the year. In addition to wages reported by employers under Code Section 3511(a), total taxable wages also include any amount reported under Code Section 6051(a)(3). This limitation applies even if the employee has not received any cash or nontaxable benefits during that same period!
• Summary Plan Description Provision — under this provision: “A plan document provision must state whether amounts paid or provided because they are excludible from gross income are excluded only if they comply with IRC Section 105.”

S-corps are a great option for transportation businesses

They’re easy to set up, run and maintain, and they’re perfect for smaller companies that want to benefit from the limited liability offered by a C-Corp while still enjoying the tax advantages of an S-Corp.

For most small business owners, filing taxes as an S-Corp is the best option.

The only reason to file as a C-Corporation is if you want to be able to sell shares of your company or take loans from investors. If that’s not something you plan on doing, then an S-Corporation is the best choice for most businesses.

It’s also important to remember that your business structure doesn’t determine the legal form of your company. It just determines how you file taxes and how much control you have over the company.

Conclusion

I hope this article has given you a better understanding of how to form an S-corporation for transportation. If you have any other questions about the process, please feel free to contact me or leave a comment below!