Should I Incorp in NV/DE? or HOME STATE? or Business State?

[NOTR]

Few days back at a truck stop on CNBC(news) I saw a program about benefits of Incorporating your business to safeguard your personal assets from lawsuits and etc., etc,. They way the reporter highlighted the benefits of forming a LLC Company was overwhelming. She talked about opening up a company in DELAWARE or NEVADA for TAX BENEFITS. But when I searched online I read few articles that even if you have a Company Name based out of DE/NV you still might have to file taxes in your own state. Now I'm all confused...... :shock: The reason, I'm from WY State(WY CDL-A LICENSE) but live in CALIFORNIA(coz of freight frequency) and my trucks plates are also based out of CALIFORNIA. I've no intentions of giving up my WY license for CA but does any fellow trucker/s over here know should I form a LLC in NV/DE or WY or I can only form it in CA since thats where I'm physically available and so is my truck. Even though I'm a single truck owner operator one thing I know lawsuits are a MESS and tax benefits are PLUS. I happen to find a website that helps register in DE/NV and they provide year around AGENT to care of the paperworks(if any since I can't move to NE/DE just for tax benefits).

Any suggestions? Is worth to take a chance to file taxes twice or no matter what if its formed in the state where you want thats the only one who can take you your taxes?

[allan5oh]

From what I hear, this is illegal and is a common scam that companies try to pull off.

Kevin Rutherford from ATBS was talking about this(channel 171 on XM). I don't remember the exact details, but I'm pretty sure you have to incorporate in your home state.

He also said it's not really worth it unless your NET income is greater then 60k.

[GMAN]

There are some major corporations which in corporate in those states. They tend to be more tax friendly than some other states. I believe Nevada also protects your personal identity. As long as you have an authorized agent in a state, I see no legal reason why you cannot incorporate in that state. You must have someone who can accept legal service should you get sued. You must also have a physical address in some states for the same reason. An agent could fulfill those obligations. I prefer incorporating in my home state. Most states have an annual report and other taxes which must be paid annually. I prefer operating within a corporate structure. There are tax benefits in having a corporation in addition to the legal protections. If someone wants to file suit against you there is nothing which will stop them. Getting a judgment against you personally is another matter. Since everyone's situation is different, I suggest you consult with an attorney who specialized in corporate law. They will be more familiar with your personal situation and those laws governing your business in your home state.

[Rev.Vassago]

If you are driving the truck, incorporating will NOT protect your personal assets in the event of a lawsuit due to an accident. If someone sued your business, they would also likely sue you as the driver.

[nsxman2001]

If you are driving the truck, incorporating will NOT protect your personal assets in the event of a lawsuit due to an accident. If someone sued your business, they would also likely sue you as the driver.

This information I was also told at the OOIDA seminar.. Incorparating helps only if your not driving the truck.. IF u are driving and u only have one truck there no protection and your paying more money in filing fees to incorporate..You should talk to a lawyer and see what you think is good for your operation..

Good luck!

[GMAN]

One reason I prefer operating within a corporate structure is the tax benefits. Although you can have some asset protection, the tax benefits are a good reason to have a corporate structure. It is also easier to keep business and personal separate.

[Rev.Vassago]

One reason I prefer operating within a corporate structure is the tax benefits.

Please enlighten us as to what the tax benefits would be for a one truck owner/operator

[allan5oh]

per diem would be one.

[Rev.Vassago]

per diem would be one.

Elaborate, please

[allan5oh]

You set up per diem as president of said corporation to pay yourself X amount per day(I think max is $52 in the US).

You cut yourself a cheque every 2 weeks for $52 X amount of days on road.

That cheque is tax free, as long as you have backing documentation.

[Rev.Vassago]

You set up per diem as president of said corporation to pay yourself X amount per day(I think max is $52 in the US).

You cut yourself a cheque every 2 weeks for $52 X amount of days on road.

That cheque is tax free, as long as you have backing documentation.

Then, as the driver, you claim that income on your personal tax return and offset it with the per-diem deduction (which is 75% of the $52), thereby negate anything you could have saved in taxes.

Example: You are out 10 days. Your corporation pays you $520 in per-diem. At the end of the year, on your personal tax return, you claim that $520 as income (yes, you have to claim untaxed income on your return), and offset it with the $390 in per-diem deduction you can legally take (75% of the $520). You then have to pay tax on the remaining $130. You gained nothing, and you lost nothing. Being a corporation didn't save you a dime.

[GMAN]

One reason I prefer operating within a corporate structure is the tax benefits.

Please enlighten us as to what the tax benefits would be for a one truck owner/operator

A corporation can set up a retirement program for it's employees. I don't recall there being any limitation or restriction on number of employees. A corporate retirement program, such as a 401k, can shelter more income than that of a proprietor or individual. Self employment tax is nothing more than Social Security Tax. As a proprietorship, you must pay Self Employment Tax on any earnings. A corporation can pay a smaller salary and then pay any profits as dividends. Dividends are not subject to Self Employment or Social Security Tax. If you do the Sub Chapter S election you are taxed as a partnership rather than as a regular corporation. A regular corporation pays income tax then any dividends are also taxed. A Sub Chapter S doesn't pay the dual tax. You can pass any profits or dividends on to shareholders (yourself) and only pay income tax on the money. An employer must basically match any Social Security Tax paid by any employee. It is a deduction for the corporation. Lower net earnings or profits will lower your tax rate. You can own your equipment and lease it to the corporation. Any lease payments are deductible and not considered as a liability for the corporation and is treated differently on the balance sheet. Just because you are a one man operation doesn't mean that you need to pay through the nose on your taxes. There are a lot of legal ways in which to save tax money and find deductions. I find it much easier to separate my business and personal money under a corporate structure. You will need a good CPA or tax consultant to help you set these up. You can set the corporation up yourself. The down side to having a corporation is that you will have about $100/year+- for state corporate taxes. I think the benefits outweigh the drawbacks.

[allan5oh]

Rev, the per diem is not income, it is a reimbursement for road expenses.

[Rev.Vassago]

An employer must basically match any Social Security Tax paid by any employee. It is a deduction for the corporation.

Deduction or not, it's still double taxing the SS.

You can own your equipment and lease it to the corporation. Any lease payments are deductible and not considered as a liability for the corporation and is treated differently on the balance sheet.

And you'll have to consider that lease payment as income on your personal taxes.

[allan5oh]

Or better yet, your SO can own the truck and lease it to the corp.

[Rev.Vassago]

Rev, the per diem is not income, it is a reimbursement for road expenses.

No it is not. It is a tax deduction allowed by the IRS. And it is $39 per day. Any more than that, and you have to consider it income.

[nsxman2001]

SO Gman Do u know of any protection under the corparation stucture if your sued in a one man one truck operation? I was told that u will be held Liable if there is an accident..

One reason I prefer operating within a corporate structure is the tax benefits.

Please enlighten us as to what the tax benefits would be for a one truck owner/operator

A corporation can set up a retirement program for it's employees. I don't recall there being any limitation or restriction on number of employees. A corporate retirement program, such as a 401k, can shelter more income than that of a proprietor or individual. Self employment tax is nothing more than Social Security Tax. As a proprietorship, you must pay Self Employment Tax on any earnings. A corporation can pay a smaller salary and then pay any profits as dividends. Dividends are not subject to Self Employment or Social Security Tax. If you do the Sub Chapter S election you are taxed as a partnership rather than as a regular corporation. A regular corporation pays income tax then any dividends are also taxed. A Sub Chapter S doesn't pay the dual tax. You can pass any profits or dividends on to shareholders (yourself) and only pay income tax on the money. An employer must basically match any Social Security Tax paid by any employee. It is a deduction for the corporation. Lower net earnings or profits will lower your tax rate. You can own your equipment and lease it to the corporation. Any lease payments are deductible and not considered as a liability for the corporation and is treated differently on the balance sheet. Just because you are a one man operation doesn't mean that you need to pay through the nose on your taxes. There are a lot of legal ways in which to save tax money and find deductions. I find it much easier to separate my business and personal money under a corporate structure. You will need a good CPA or tax consultant to help you set these up. You can set the corporation up yourself. The down side to having a corporation is that you will have about $100/year+- for state corporate taxes. I think the benefits outweigh the drawbacks.

[allan5oh]

No it is not. It is a tax deduction allowed by the IRS. And it is $39 per day. Any more than that, and you have to consider it income.

That's the most popular way to do it.

The other way is for the company to reimburse you. They get a writeoff, and you get tax free money.

[GMAN]

An employer must basically match any Social Security Tax paid by any employee. It is a deduction for the corporation.

Deduction or not, it's still double taxing the SS.

You can own your equipment and lease it to the corporation. Any lease payments are deductible and not considered as a liability for the corporation and is treated differently on the balance sheet.

And you'll have to consider that lease payment as income on your personal taxes.

I am not sure what you mean about double taxing the SS.

Lease payments can be considered personal income, but the equipment can be depreciated. If your corporation pays the same as your payment or more, then the income is still considered business income and not subject to Social Security Tax. If you own the equipment personally you may not need to pay some annual property taxes required in some states for equipment owned by the corporation.

[GMAN]

SO Gman Do u know of any protection under the corparation stucture if your sued in a one man one truck operation? I was told that u will be held Liable if there is an accident..

Nsxman2001, I have owned corporations for more than 30 years. I prefer this type of business structure for a number of reasons, one of which is the personal protection. There is nothing that will give 100% protection against litigation. In an accident the driver is often named in the suit. The lawyers want money. They usually go after the deep pockets. That is normally the insurance company. Unless there were casualties or property damage considerably more than what the insurance covers, I doubt that you would have any personal financial liability. Most lawsuits are settled before going to trial. I spoke with an individual with the FMCSA a while back and was told that litigation is the reason that they no longer put the actual amount of insurance coverage a carrier has on file. They only put the minimum requirement. The reason is that individuals and lawyers were checking the website prior to filing their lawsuit to check to see how much damages they could file on. In most cases the way an individual is held liable is that they pierce the corporate veil. The most common way they can do that is when an individual intermingles corporate and personal assets. The easiest way to separate personal and corporate assets is to have a separate corporate bank account. Pay yourself a salary rather than just taking cash out of the corporation. Sign all legal documents with your title after your signature. Not putting your title after the signature could potentially obligate you personally. I would not concern yourself too much about personal liability under a corporate structure. I think the likelihood of you being held personally liable for any damages under a corporate structure are remote.