What steps to make to change company name

I did well when I drove a company truck, but that was many years ago. My situation is different than yours. That is why I would not advise you which way you need to go. I am also not a CPA or tax attorney. I do know that you cannot set up a 401k as a sole proprietor. You can set up an IRA. I won't get into my personal income on a public forum, but one thing I will share with you based upon your figures. If you have a corporation that has a net income of $39,000 (sub chapter S) and you pay yourself a salary of $20,000 and $19,000 in dividends, you will lower your taxes. As an employee you pay 1/2 of your social security taxes (7 1/2%). Your employer pays the other half. If you are a sole proprietor you will pay the entire 15%, which is the employee share as well as the employer share. As a sole proprietor it is called self employment tax. Social security or self employment taxes are ONLY paid on wages. If you show $39,000 in self employment income then you will pay 15% to the government for those taxes. That is separate from any income taxes. You will pay $5850 in self employment taxes. If you pay yourself $20,000 in salary and the remaining $19,000 as dividends then you will pay $3,000 in social security taxes (including the corporations contribution). You will be an employee of your corporation. This could save you $1,850 in social security taxes. You still pay income taxes, but will at least save on your social security or self employment taxes. There are other ways in which to shelter income and pay less taxes under a corporate structure.

If you are happy paying $1,000 in taxes, then fine. I prefer to pay as little income taxes as I can possibly legally pay. There are way too many variables when it comes to taxes to advise someone else what they need to do. I don't necessarily think that everyone should incorporate their business. Some could be better off as a sole proprietor. If you are a company driver then there is no need to set up a corporation.

I don't know the particulars about the people whom you filed suit where they the individuals were included. They may have mixed personal and business assets which allowed the corporate veil to be penetrated. There are certain things you must do in order to protect yourself when you operate under a corporate structure. It may also have been that the owners of the corporation had liability based upon their behavior or for other reasons. Sometimes the corporate structure will protect the stockholders, other times it may not. If you do everything you are supposed to do then you will minimize the potential exposure of the corporate veil being penetrated. When I say penetrating the corporate veil, it means that the court will allow the officers or stockholders to be held liable for the debt. It eliminates any protections that the corporation was designed to afford the shareholders. Simply signing your name on a contract without your title (i.e- could allow the corporation veil to be penetrated and you to be held personally liable).

 

What I meant was Roth IRA. I'm no tax expert I just read the book every year and see what is new. Right now I don't pay myself a salary per se. I just pay at the end of the year. I am able so far to eat up enough money with the
daily per deim and business use of the house to leave very little left for the tax man. Now hopefully one day I'll make enough to take a second look at it.
I can see there could be benifits at a later date. Your deduction for per deim changes when you become a corp if I remember right? But I was reading recently theres a way to pay yourself differently also.

 

Paying yourself a salary when you are a sole proprietorship will not do much good from a tax standpoint. It might help you to better budget your money. The company profits and your wages are all considered the same.

If you mean the driver's per diem, it should remain the same if you plan on continuing to drive, whether you are incorporated or not. The per diem as offered by the IRS is for unreimbursed travel expenses. You can keep track of all expenses and count all expenses or take the per diem for each day you are out of town. It is easier for most drivers to just take the daily per diem. Again, it depends on how you handle things. If you have a corporation and the corporation pays for all road expenses, then you may not be able to take the per diem on your taxes. On the other hand, you will have a more complete and accurate record of your road expenses by using actual expenses. I usually find it easier to take the daily per diem.

 

Right now I claim per diem on scedhule C @ 58.00 per day @ 80%.
If you claim it on personal taxes it changes things on scedhule A you're only allowed a certain percent of the total( or something I didn't understand)??
From most of the guys I met running one truck all that extra stuff is unneeded and just makes a job for a CPA. My dad had a Inc. business some years back. The CPA filed wrong and my dad had his bank account frozen and had to sell his second house to pay off 30,000's of unknown taxes. Not to mention his checks bounced when account was
frozen brother totaled his car with no insurance unknown at time too.
Eveything my dad had worked for over thirty years for was gone becaues of incorparating his business and a CPA. He thought he was protected to by being incorparated. To this day he states work for cash and never work for a company all the years like I did.

 

You can take the per diem on days that you are on the road as long as you maintain a permanent residence.

I am sorry that your Dad had a problem with the IRS. It sounds like the problem was his CPA, not having a corporation. If the CPA filed the wrong form, then it was up to him to get it straightened out. The IRS won't levy on a bank account or put a lien on someone without notice. All they want is money. The CPA should have refiled his taxes on the right form if that is what happened. I can't imagine any CPA worth his salt filing a wrong return and allowing something to get to the point of a levy. The IRS can come after the officers of a corporation if there is fraud or possibly for other reasons. Again, not knowing the specifics, I am making generalized statements. Your Dad should have gone after his CPA if it was his fault and he failed to correct it. When you own a business it is ultimately up to the stockholders or owners to make sure that things are filed and up to date. More than likely either your Dad or his CPA or both, ignored letters sent by the IRS. Even if your Dad operated as a sole proprietorship, it would likely would have had the same outcome.

 

Great information G/MAN. I would like to add that if you are Inc.(s), and you continue to drive, by the letter of the law and by IRS interpretation during several audits, you can no longer take the standard per diem deduction. You must keep records of your daily expenses and deduct that, rather than using the much more favorable standard per diem deduction of 58 per day, or whatever it is now.

 

G/MAN, please enlighten me. What are the possible benefits of a C corp for a small carrier, like myself? I don't really see one. What I do see is having corporate taxes and thus losing the huge tax break that we get with an S corp.

 

I don't think that this will affect me too much since I don't drive that much these days. But, thanks for the information. However, I don't see how being incorporated would make a difference in whether you could take the per diem or not. If you are a company driver you are considered an employee and can take the deduction. The form used is for unreimbursed travel expenses, as I recall. Trucking is unique in that we can either take the per diem or keep all receipts and deduct actual costs. I don't see how the IRS could interpret the deduction any way other than as it is written. I would be interested in knowing more about how they came to the conclusion that you would not be allowed to take a per diem deduction if you are incorporated.

 

I see few advantages of a small business having a C corp over a S corp. The main benefit that I can recall involves being able to change your fiscal year to take advantage of new tax legislation. It may be easier to raise capital through the sale of stock with a C corp, since you are not limited as to the number of shareholders as you are with a S corp. But, most small companies are not going to to a IPO.