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Most lawyers will go after the easy money. That usually comes down to the insurance company. If negligence can be proven, then they could come after personal assets. While anyone can be sued, they may or may not be able to get a judgment. In any case, the corporate structure can give some personal protection.
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.
You are correct. Most think that just because they have a lot of cash flow that they are making money. As you and I know, you could be grossing millions of dollars and still be going bankrupt. Owner operators should find a good tax professional to help them do some tax planning and help lower their tax bite. It would be good to find someone who is experienced in this business. I would prefer someone local rather than one of the services such as ATBS, but that is only a personal preference. Having a good accounting program or spreadsheet to keep records up to date can also help. You don't even need to have software as long as you write everything down. I think those who have failed are most likely the ones who have kept poor records. They don't know that they are broke until it is too late.
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.
As long as you pay yourself the equivalent of minimum wage, there isn't anything that they can really do. In fact, I am not sure that if you decided to pay yourself $1/yr that they could really do anything about it. They cannot dictate how you divide your income. You can pay yourself mostly in dividends and as long as your records are straight, you should have no trouble passing an audit. I know one guy who had several hundred thousand in annual income in his business. He paid himself $30,000/yr and the rest was either left in the corporation or paid as dividends. He has never had a problem. A low salary could peek their interest, but there is little they could do as long as the numbers add up. With a proprietorship, you have little choice. Everything that is left over after expenses is considered as wages and treated differently than a corporation. Under a corporation you could have the same money, pay yourself a low salary and the rest in dividends so that you will pay less taxes. A proprietor can really get ripped off when it comes to some taxes. Again, it is different with everyone. The best thing is to find a good corporate attorney or CPA that is familiar with this business and you can trust.Originally Posted by no_worries
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. Most lawyers will go after the easy money. That usually comes down to the insurance company. If negligence can be proven, then they could come after personal assets. While anyone can be sued, they may or may not be able to get a judgment. In any case, the corporate structure can give some personal protection.
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.
You are correct. Most think that just because they have a lot of cash flow that they are making money. As you and I know, you could be grossing millions of dollars and still be going bankrupt. Owner operators should find a good tax professional to help them do some tax planning and help lower their tax bite. It would be good to find someone who is experienced in this business. I would prefer someone local rather than one of the services such as ATBS, but that is only a personal preference. Having a good accounting program or spreadsheet to keep records up to date can also help. You don't even need to have software as long as you write everything down. I think those who have failed are most likely the ones who have kept poor records. They don't know that they are broke until it is too late.
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.