March 15, the date of filing my corporation`s tax returns. I’ve always been an independent owner and this is my first year as a corporation and I don`t know what to do. The information I have on this subject is very scarce. The people who helped me in the process to register the corporation didn’t give me more details about it.
They tell me that there are several types of corporations and so far, I ignored my type of classification. I don’t know if it’s corporation C, or corporation S or LLC (Limited Liability Company). It’s really time to look for someone who has knowledge on this subject and can guide me.
The above shouldn’t happen to us. If we want to be properly advised, it’s important to hire a good professional. The best suggestion for each trucker is hiring a CPA (Certified Public Accountant), EA (Enrolled Agent) or a tax lawyer, who really has knowledge about corporations.
What is a corporation? It’s a legal entity, constituted by natural persons fulfilling a certain objective. It’s formed by one or more people in the search for a common goal that is to achieve the well-being of the group.
Knowing what a corporation means and that there are different types of classifications, it’s necessary to determine what type of corporation is most convenient for each transportation business. Currently, after learning about the new AB5 law in California, the decision to make a wise choice becomes more important, since our financial and legal peace of mind depends on that.
Next, I’ll present the different types of corporations:
The most recommended corporation is the Small Business Corporation, popularly known as S corporation. Why is it the most recommended? Like the other types of corporations, a minimum of $800 is paid annually to California. $0 taxes are paid to the IRS because the profit is transferred to or partners of that corporation. The benefit of using an S corporation is that we can save from 40% to 60% in personal taxes. But not everything is free, the IRS requires maintaining accounting and having a payroll of at least one employee in the Corporation.
Corporation C isn’t very favourable for a trucker, since they pay double taxes, as corporation and as an individual.
LLC (Limited Liability Company) pays $800 to the state for the first $ 250,000 of gross income and $00 more for each additional $250,000 of income. On the other hand, if you are the only member of the LLC, the IRS doesn’t recognize that type of organization and you would have to report the LLC in your personal taxes. In short, you would be paying the same amount of taxes you pay as an independent owner.