Setting up a corp. questions
 

How are you guys set up? S Corp, LLC, Sole Proprietorship? I'm thinking S Corp, but I wanted to get some feedback from the O/O's.
Thanks

Sole Proprietorship

90% of one-truck O/O's (and 99% of new) won't benefit from doing something more complicated than a sole-proprietorship.

I thought that setting up as an LLC gave you alot more protection against getting sued.

You can always be sued personally. Whether a corporation or LLC will provide much protection depends on how it is set up and how you operate. It doesn't take much to pierce the corporate veil. I have always preferred a corporate structure. There are a number of reasons, taxes being one of them. Again, everyone's situation is different. You should sit down with a good CPA or corporate attorney and follow their advice. I would go to a corporate attorney rather than any other type of lawyer. Most will give you an hour of their time. Even if they charge, it should not be that much. An attorney would be able to tell you what is best in your circumstances. A CPA could advise you on the tax implications.

How does the setup affect the protection? With either of those entities the protection is the same; and if it's a one truck operation (owner driven) that protection is zero. Assuming that everything is done by the book, you have to reach approximately $60,000 net before realizing meaningful tax benefits from incorporating. Sadly, the vast majority of one truck operations aren't making those numbers. Until the operation is consistently hitting that threshold, incorporating is simply throwing money away.

From a personal protection standpoint, I don't know if one is better than the other. There isn't much difference between them. All of the structures will offer some level of protection. I received a call from a guy who works for a company that does Nevada corporations. According to him, a Nevada corporation will not allow the corporate veil to be penetrated. I have not researched it, but I have my doubts. If you mix corporate and personal funds the corporate veil could be penetrated.

It is sad to think that most owners don't net at least $60,000. I don't think that one would need to have that much income in order to have some tax benefits. You could have the corporation set up a 401k for you. You could pay yourself a small salary and have any profits be paid as dividends, avoiding Social Security or self employment tax, since Social Security is paid on wages. If you are a sole proprietor anything left over after expenses will likely be considered income and taxed accordingly.

There is no one size fits all when it comes to taxes, corporations, etc., The best thing to do is consult with a professional who can look at the individual's circumstances and advise them accordingly.

The piercing of the corporate veil is irrelevant when it comes to a one truck operation. They sue the driver as an individual because he was operating the truck, along with the company. The corporate veil only serves a purpose when it's solely the company being sued. So long as the veil is intact, the owner's personal property is not subject to the suit.

It is indeed sad that most O/O's don't net more. But surely you'd agree that most of them end up making no more than they would as company drivers. ATBS and some others post numbers every once in awhile regarding income levels. A good percentage make less than they would as company drivers. Of course, most think they are doing better than they are because they don't understand proper accounting; they simply look at cash flow.

The analysis has been done many times regarding the threshold where meaningful tax benefits kick in. While they certainly result in a range, $60,000 is the most commonly cited number. Of course, this is assuming that everything complies with IRS guidelines. The biggest issue (and one you and I have argued before) is the salary level. If you gross $200,000 on 90-100,000 miles and try to pay yourself just $20,000 in salary, you'd have a hard time justifying that as reasonable in an audit. Of course, they have to audit you to catch you.

Does anyone know if there are any advantages to setting up my wife as owner to have it certified as a woman owned business? I know if some fields there are some real advantages to that but I don't know about trucking.

The only two direct benefits that I know of are SBA loans and bidding on government contracts. In those two situations, it can give you a leg up. If those two things aren't in your future, I wouldn't worry about it.