Splitting Owner-Op / Lease-Op driver pay & LLC revenue?

There are tax advantages to that method but you need to net at least 80k or more a year to make it worth while. For most O/O it's not worth it by the time you pay the expenses for the LLC it comes out about the same or it might even cost you a bit more.

 

There is an advantage if you are an S-Corp for tax purposes. LLC means nothing to the IRS. If you are an LLC and file as a Sole proprietor there is no advantage. If you are an S-Corp and pay a 35,000 salary it depends on the net profit for the company. After you pay all expenses including salary whatever is left is profit and it is taxed as income but no Social Security is paid on it. There may be other expenses that offset the SS savings, unemployment, workmens comp to name two.

 

I stopped at the idea that anyone can make $5k a week gross, I thought you made something like $390 a week for most.

 

I'm trying to figure out where you numbers came from. I know it's probably something simple, but where do you get $390/week?

 

Just want to make sure this is clarified. A regular llc is treated for federal tax purposes as a sole proprietor. As an llc, you can elect to file for a subchapter-s treatment, which will require the members to start taking a salary that is consistent with the average person in the industry. That will require you to pay all the payroll taxes for both federal and your state. Then the profit above that is taken out as a draw and doesn't get taxed ss and Medicare, just your ordinary federal income tax rate. Ss and Medicare is about 15 or 17%, but on your personal tax return you get half of that back anyways if you file self employment taxes. If you pay yourself as a w2 employee then you don't get to deduct that from your personal tax return.

 

It gets a little tricky. I am an LLC with a S corp tax structure. I pay myself the prevailing average income of truck drivers in my state per the Dept of Labor stats. For me, that is $39K to $41K a year. Income tax and FICA paid on that. Anything after that and expenses is net to the "company" and gets passed on to me as a distribution, since I am the sole owner of the LLC. Income tax only on that. The IRS is going to require that you pay yourself at least what the prevailing average wage of drivers in your area of the country. Play fast and loose with that, and could be a real headache. But, it can be a good way to minimize tax burden. Not paying 15.3% FICA on those distributions can save a nice chunk of change. If one's distribution is, say, $20K, the savings by not paying FICA on that is $3060.

You do get to deduct half of the SE tax on your return as a sole proprietor, but you also get to deduct the employer portion of FICA tax on your payroll if you pay yourself as an employee under the S Corp tax structure. In other words, it works out exactly the same. Remember, the employer pays half of the FICA tax on payroll for an employee. Employee has a 7.65% FICA on their payroll and employer has 7.65% FICA contribution also. So no matter which way you roll it, you will get to deduct 1/2 of the amount paid to Social Security and Medicare. Either as a sole proprietor or corp.

 

Very informative thank you just bought a truck title Wil be coming in a week or so paid off friends loan on truck so I have no payments .I'm leased to a company that is going to send the 1099 should I form a llc with s Corp tax structure? he pay me by his company check after his dispatch %7 and fuel (we use his company fuel card) say we gross 7500 after his dispatch and fuel it's 5000. Now to form a llc should the title be on llc's name also ? Or I can just form an llc and ask him to write the check to my llc and then I pay my self .
Is it better to have two owner on llc I have my brother with me .and can u just form an llc for that purpose only with out any mc ,dot ,ca number (we live in
ca ) or there are some kind of transportation permits required to form a llc from state or federal .any advice would be appreciated. Going through that time when u are new at something and in serching.
Keep truckin be safe out there all.

 

It doesn't matter if the title is in the LLC name. If you own the LLC, it is six of one, half dozen of the other. If both of you have equal stakes in the business, it can be ok to do a two partner LLC and title should be in the LLC name. But keep in mind, after payroll, any profits the LLC has must be distributed equally among owners. The checks go to your LLC, and then you pay yourself from the LLC. This is if doing S Corp tax structure. If not, it is a sole proprietorship and same as if you didn't do LLC. If one person has the major stake in the LLC, and is doing the major task of managing it, then make it a sole owner LLC. Ask any CPA and they can advise you on doing LLC and S Corp. For me, doing an LLC was a simple, one time fee of $150. The S Corp part was just a filing of the proper paperwork with the IRS. The CPA can take care of all that for you.