So you’ve been driving for a company for a while and are looking at branching out and becoming an owner operator. There will be many decisions to make when you start out on your own including if you will be operating as a sole proprietor/LLC or under the S-Corp business classification.
We are going to go over what each of them is, what some of their differences are, and what some of the pros and cons are for each one, to try and help you make the most informed and best decision for your business.
Please keep in mind that while we are working hard to provide you with the best information for your business it is important to consult with your trusted legal representative before making any final decisions on your business. Owning and operating a big rig comes with a very high amount of risk and liability and while there might be some basic information that works for everyone, each owner operator has unique needs, resources readily available to them, as well as demographically-specific rules for their business, and each of these needs to be considered when deciding how to run your business successfully.
Before you can decide which option is best for you, it’s important to understand what each one is.
This is the part where you have to sit down and answer some questions about your personal situation to decide what type of business structure will work the best for you.
The simplistic design and low costs make the Sole Proprietorship/LLC a great starting point for your business. You do need to get with a tax professional that is familiar with the trucking industry to make sure that you are set up in the best way possible and that understands the best ways to help you throughout the year to set you up the best during tax season. Many drivers who have worked for a company and have always had that part taken care of by someone else can really get themselves into a bad situation by not investing in a professional. If you are a member of your LLC you have to pay self-employment taxes on all of your next profits, and if you haven’t prepared for that it could end up hitting you hard come tax season.
If you are looking at growing quickly in your business and know that you will be over that $70,000 average mark it could be worthwhile to look into the S-Corp business option. This gives a lot of options for putting back more money towards future retirement and although it does require more tax forms and set payroll systems, it could set you up in a good position going forward in your business.
It is also important to be familiar with your state rules as well as the other states you operate in when setting up your business to make sure you are set in all areas. This again is where a trained tax professional could really be worth their weight in gold for you and your business’s success.