Sole prop get an llc?

first off you cant do sole prop because their are 2 of you. you can do a partnershi

and are you 2 going to be operating the truck yourselves or hiring a driver? you can do it all yourself if you are capable, but with 2 of you trying to draw salries off of one truck, you may not have much income to worry about.

 

If you form a partnership, you will not pay yourself a salary like an employee. Partners receive compensation in the form of "guaranteed payments" from the partnership and then the partners have to pay estimated taxes based on the amount of guaranteed payments they receive. It is worth the time and money to consult with an accountant to go over the various entities you can form and the pros and cons of each entity based on your situation.

 

I've been flamed in the past for my opinion on this matter but I will risk it nonetheless...

If you are incorporated as an S-Corp or LLC then there is NO reason to take a "salary" from the company. Instead, pay yourself a minimal wage - say equivalent to the 21 cpm that bottom-feeder company drivers make. This minimizes your personal taxable income while keeping the IRS off your back. The corporation can then provide perquisites to you and other company officers that are taxed as unearned income (benefits) furthermore the benefit could be structured so that the company pays your tax on that benefit. These kinds of "employment agreements" are common for corporate executives.

Every month or quarter you and your business partner get a "special" dividend payment from the company. It is the special dividend payment trick that the Flying J owner used to buy the football team - $700,000,000 special dividend. Another possibility is for you and your business partner to take a "loan" from the company. The loan must be documented with its terms but there is NO requirement for you to make any payments if the terms of the loan do not require payments (you write the terms); i.e. the loan must be repaid when you terminate your employment with the company. No taxes on a loan.

There is nothing illegal or even shady about doing things this way it's all about paperwork to document everything. Unfortunately, the tax code is structured to provide benefit to businesses not individuals - Google Apple tax rate (0%), or Walmart or Microsoft, or GE, or...

 

And you need to check state tax code. TN and IL are very different (states I have recent experience with).

 

An LLC your earnings and profit will be taxed at your personal tax level but it will not leave you with asset protection as many believe.

An S-corp is like an regular corp but the profits are taxed like the LLC.

However dividend are limited to a percentage of your income unless you are an owner but do not manage or operate the corporation. I forget the percentage but the IRS will treat this as income like a paycheck.

I would get a good accountant and lawyer to look at your situation and make a few suggestions about it.

AND to add to that, a limited partnership is a PIA, I would look at a corp or s corp and forget the idea of an llc.

Why?

Because with a corp, you will not have to have a lawyer involved to split up the partnership lin in a limited partnership or LLC, just do a stock transfer and you are done with it.