An S corp shields you from personal liability as a business owner, but a lawsuit could still devastate your tech business’s finances. The right business insurance can protect your bottom line from lawsuits, property damage, and other risks.
This policy protects S corps against legal costs from common third party (non-employee) claims. Bundle it with commercial property insurance in a business owner's policy (BOP).
E&O covers the cost of lawsuits filed by clients or customers that accuse your S corp of an error or oversight. It's also called professional liability insurance.
State law requires that S corps carry this policy when they hire employees. Workers' comp covers medical expenses and lost wages if an employee is hurt on the job.
This policy helps S corps recover after a cyberattack or data breach. It can also covers legal costs when an S corp is held responsible for failing to prevent a client's data breach.
EPLI covers liability lawsuits filed by current or former employees who say they experienced discrimination, harassment, or another violation of employee rights at your S corp.
This policy covers the cost of property damage caused by incidents that are out of your control. Many commercial landlords require this coverage.
Most states require that you carry commercial auto insurance for vehicles owned by your S corp. This policy covers costs related to an accident involving a business vehicle.
D&O protects directors and officers from lawsuits related to decisions they made on behalf of your S corp. Some people may require this coverage before they will join your S corp.
A fidelity bond compensates the injured party if an employee steals money or assets. Clients might require you to buy a bond before they'll work with your S corp.
When buying insurance for your S corp, see if you can bundle policies to save money. For example, a small, low-risk company might qualify for a business owner's policy (BOP). This package includes both general liability insurance and commercial property insurance at a discount.
S corporation owners in the tech industry usually need both cyber liability insurance and errors and omissions insurance. You can buy these policies together in a package called technology errors and omissions insurance (tech E&O).
Note that there are two different kinds of cyber insurance. First-party cyber liability insurance covers data breaches and cyberattacks on your own systems. Third-party cyber liability insurance covers data breaches on clients’ systems that you worked on or for which you are responsible. Tech E&O includes both types of coverage.
An S corp is a designation some small businesses elect for tax purposes. It can reduce the amount of Social Security and Medicare taxes (sometimes called FICA) that your company owes.
Owner-employees are required to pay themselves reasonable salaries, including payroll taxes as both employer and employee. But profits beyond the salary are not subject to FICA taxes.
S corps aren't required to pay corporate income tax. Instead, profits can be distributed to the S corporation shareholders as dividends, which are reported on their personal tax returns.
Beyond the tax benefits, an S corp protects the personal assets of its business owners by shielding them from legal liability for the corporation. Unless an owner makes an express personal guarantee, the owner doesn’t have personal liability for the debts or expenses of the business.
This means that a court can’t dip into the pockets of the S corp’s owners to cover the cost of judgments against the corporation. Owners are liable only if they act negligently or violate the terms of the S corp.
The IRS considers business insurance part of the cost of doing business, which means you can deduct your insurance premiums from your taxable business income. To claim the tax deduction, you'll need to file the proper paperwork. For worksheets that help you calculate deductions, see:
A tax professional can ensure you file your business insurance tax deduction correctly. The deduction can include all the recommended insurance policies for S corps, along with the cost of unemployment insurance, health insurance, and life insurance. However, health and life insurance premiums for a spouse or domestic partner's employer-sponsored insurance may not be deducted.
Some other insurance payments can’t be included in the tax deduction, such as:
With TechInsurance, you can compare business insurance quotes from top-rated carriers with one easy application. Get free quotes for coverage that matches your S corporation's unique risks and budget.