[Mystikal]

I realize nobody here is an attorney, nor do I expect that anyone stayed in a Holiday Inn Express last night.. but I figure maybe someone ran across this at one point and can provide a direction for us to head. We plan on contacting an attorney this week to seek their advice, we just have to find the time.

Anyways, my wife and I are team drivers and will be getting into a lease-purchase agreement next week on a brand new truck. This program actually proves to be lucrative for us and, if done right, will work out great. However, we have a unique circumstance that I doubt few have run into not related to the L/P program.

Obviously in a L/P program the company takes out the expenses (truck, insurance, maintenance, etc…) and pays net to the truck… which right now will go into our joint account.

Now, the problem herein lies with my wife’s ex. She currently pays child support to him (long depressing story I prefer not to get into) and he’s a cutthroat greedy SOB with a wealthy family background and high power lawyers that LOVES to and TRIES to take every dime from her… and attempts this by taking her to court every 8 to 10 months (if not less) moreso as a verification to see if her income has increased by more than 10% so he can get more. My concern is with the net amount being deposited into our account and a settlement being sent… he will be able to get the percentage factored out of the net pay being deposited. Is there a way to protect us in this regard so this amount is not being scrutinized… just her pay and not the to the truck net pay?

And, before I get flamed I want it to be known that we’re not trying to reduce what we pay by any means nor avoid paying what she is ordered now… child support is that and we both believe the kids deserve to be taken well care of… we just don’t plan to use all the net pay deposited as our actual driver pay… we plan to pay what we’re making now as company drivers (.40cpm split) and use the rest as our backup maintenance fund for the “company” and other incidentals that might come up to run the business.

We’ve considered incorporating and having me as the owner and her being an employee so our business assets (business savings, truck, etc…) are separate from our personal income and savings…. but from what I’ve read it seems like so much hassle for only one truck and a waste of money.. so we’re open to some suggestions and ideas we can bounce off an attorney.

Please keep this thread on topic if we can... the debate isn't about the L/P program but rather how to best protect our assets. I have done my research about this program and talked to other drivers that have done this program successfully so we're aware of what we're getting into there. Thanks guys...

[no_worries]

It ultimately comes down to your state and what its laws are regarding income/assets subject to child support calculations. You will certainly have some options, especially if she isn't worried about not being named as an owner/shareholder. Your example is a good option depending on your state's rules regarding spousal income. If they only take your wife's wages into consideration then it will work. Of course, you don't even have to go as far as incorporation. Simply having you as a sole proprietor and employing her would fit the bill too. This won't fly in many states though. Some community property states will consider anything that's yours hers. Some also use household income in making child support determinations rather than individual income. You also have to be aware that most states will not allow such an arrangement if they determine that it was set up specifically to avoid paying more support. If her ex is as you describe, it wouldn't take much for a lawyer to make the argument. However, it can be countered fairly easily provided that she is being paid a normal industry wage and does not have anything to do with the operation of the company. This is all just some food for thought. You're making the right move in talking to an attorney BEFORE getting set up.

[Fredog]

Form an LLC, it is cheaper and will offer you the same protection, it makes your business a separate entity

[solo379]

I don't know, what you mean by "NET". Normally, it's what your schedule C will show, not your company issued settlement. As far as i'm concerned, most "L/P" deals, didn't yelled even decent driver wages. But consulting an attorney is defiantly a good idea anyway. And while at that, make him review your lease agreement as well.

[Mystikal]

no_worries.. thanks for the thorough response. We would be paying ourselves the same wage we are getting now, which is what the child support is based on, and the .40cpm split between us is more than i've seen alot of companies pay so hopefully that isn't an issue. In the past few monetary reviews the State of Colorado paperwork hasn't asked for household or my income.. just what was in the checking and savings account at the time she filled them out so that shouldn't be an issue either.. but we'll see once we talk to an attorney. I'll post what i hear back in case this question comes up again.

Fredog, thanks for the recommendation... my wife suggested the LLC route as well.. not a full out corp but still keeps the company assets separate from our personal assets. If thats whats recommended by the attorney thats most likely the way we'll go.

Solo, net is what we get after the company takes out the fuel from comdata, truck payment, and insurance (the incidentals).. but is still pre-tax. Keep in mind that as a team well be running quite a bit more than solos.. i've seen the settlements from others that are involved in the L/P at our company so I have an idea what we'll be bringing home each week. I've actually heard rumors that well over 60% of the company is L/P and most are happy so i'm not too concerned with the program. I'm a stat junkie.. and knowing what our truck will cost and all the incidentals already because of those in the program, and having tracked fuel expense for all our miles over the past 4 to 6 weeks we know full well what we're going into and how much we'll be paying ourselves.. and the .40 split is perfect. Honestly its more than we need since we're debt free but we're keeping it the same just because of this whole court issue. Thanks for posting.

[no_worries]

You have to be careful with the LLC regarding which tax option you choose. The default option is sole proprietor for one member and partnership for two or more. If you intend to set up as a single member LLC, you might as well stick to a sole proprietorship. That is how it would be taxed anyway and you can hire your wife as an employee in either. If both of you are to be members, you will want to elect the corporate taxation option and then, most likely, opt for s-corp status. As I said, the default tax form for an LLC with two or more members is a partnership. Partnerships are pass-through entities. This means that the business itself pays no tax, all profits are passed through to the members and all taxes paid on their returns. So, if the business had $80,000 in profits and you paid yourselves $30,000 each in wages, the remaining $20,000 would still show up as self-employment earnings on your tax returns. Now, it's possible that your state would exempt everything but wages in this situation...but I doubt it. Electing to be taxed as a corporation keeps the business earning separate.

[GMAN]

I prefer a corporate structure for a number of reasons. It is fairly simple to function within a corporate structure. If you file a sub chapter S with the IRS, then it will tax you like a partnership. If you both collect a salary from the corporation and you are the sole stockholder then only her income should enter into any court situation. For a while a lot of people used the llc or llp when setting up a new entity. I looked into them for a company that I started and decided to stick with a standard corporate structure. I have owned a number of corporations over the years. For me, it is the best route to go. Other than some limit of liability there are some tax advantages that you can utilize as a corporation. But in your situation I share others opinion that you are doing the right thing in checking with an attorney before doing anything. And I agree with solo that you should run your lease agreement by him as well. In my state the fees are about the same for an llc or corporation. There is a minimum annual franchise and excise fee of $100 plus a $20 for an annual report. Each state is a little different in how they tax a corporation or llc.

[Mystikal]

Thank you gentlemen. I didn't understand a word but the wife is handling all the business paperwork stuff... I just fix and lift heavy things. Thank god for her business degree! She said she understands and now knows the questions to ask an attorney on Monday.

[Steel Horse Cowboy]

I'm staying at a Holiday Inn Express tonight....... but I doubt I could even begin to answer your question in the morning...... but who knows.

[repete]

Why do you have to do a LLC or INC? If you were running team with some one else you wouldn't have to do that right? (I really don't know) Can't you just split it even and each of you keep seperate accounts? How you leaseing the truck and her be a second seat or assistant driver meaning paid say 40% instead of 50%. I have no idea if this would work but it's worth asking about.