I am without a lot knowledge so I was looking for clarity. Why do some o/o pay themselves in a one truck operation? If the truck is making profit does it matter how you divide it? If gross profit is 3k for the week and you set aside some money for maintenance, taxes, isn’t the rest all yours? Can someone enlighten me please because I thought bottom line was to mak more money than a company driver.
Looking for clarity
Discussion in 'Ask An Owner Operator' started by S.V.Buyck, Mar 7, 2021.
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Taxes.
JoeTruck, Vampire, Farmerbob1 and 3 others Thank this. -
Depends how you set it up. If it's just a sole proprietor yeah you can do whatever you want with the money.
If you set the business up as a completely separate entity it's not your money, it's the businesses money. You must pay yourself a wage, with payroll taxes and everything.
That's the short answer anywayTrucker61016, GreenPete359, 86scotty and 2 others Thank this. -
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Maybe you're a little confused why they would do this if they were a sole proprietor since its all the same account. Most O/O have a corporation though. So it is physically a different business account from which you have to actually pay yourself as an employee. Money does transfer from the business account to your personal and that is your wage.
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When I had a limited company, I had a payroll account and held back my taxes on my wages, then submitted the taxes quarterly.
I’m now a sole proprietor. I have a separate bank account for business use. When I pay myself, I transfer an amount once a month, then take a calculated portion of that and send it to a third bank account that I set aside for taxes. Then remit that quarterly.
How much you pay yourself depends on your operation. Early years I was lucky to make $30,000 a year. Then $50k became common. Then $70-80k. Now breaking $100k, but that’s only because I’m out of the land of payments. Truck and trailer are paid for, I won’t be replacing them. Heading for retirement in a year or so. -
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In a nutshell, a solo o/o pays himself a reasonable salary and then, of course, draws dividends - which are subjected to lesser taxes than the payroll.
It is a matter of a personal challenge and daring when when a solo o/o draws more in dividends than in the "reasonable salary" - in order to make up for what the "reasonable" might have not been reasonable after all.
Some say that from all the gross profit the "reasonable" is at least 60/40 ratio , some say 50/50...but let's be reasonable and honest here - the reasonable is reasonable only if you were able to actually hire someone to do YOUR driving work for that salary. Well, now it is a matter of interpretation and further polemic if you could find such a person or not.
P.S. Not only the driving work but often the clerical work as well.Last edited: Mar 8, 2021
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