From Sole proprietor to LLC??

Hi guys,need help.I'll become to O/O soon,and I knew I should form a entity 1st.so,what type entity should I form,I means INC or LLC? which is better for just 1 truck and husband&wift team up?which one will saving on tax?thx

 

It's a loaded question. Let's give you a more or less simple breakdown (although nothing here constitutes financial, tax or legal advice - check your local licensed professionals for more clarity and details):

1) if you want a simple ownership with fair protection - just stick with a single-member LLC. It assumes that you will be the sole owner of the LLC, but you can still file jointly your taxes with your wife on a 1040 form, and she can still be entitled to 50% of the LLC due to your gift to her or 100% in case of your death.

2) if you want a more complicated accounting, but better legal protection, go for a two-member (multi-member) LLC, which needs to file a K1 partnership form each year, in addition to the 1040 form.

3) If you want a far more complicated accounting and ownership (due to mandatory payroll, quarterly tax payments, etc), but enjoy greater tax savings, as well as most legal protection, then go for an LLC taxed as an S-Corporation.

4) If you want the most complicated accounting and ownership, but most legal and tax benefits, go for a pure corporation (C Corporation).

What many truckers would pick: when one is starting out, and every penny counts, option #1 is probably the best just because it is the easiest. If you want more tax and legal benefits, but more headache, then go for option #3. Options #2 and #4 are not so good for a trucker.

Once again, absolutely nothing in this constitutes any legal, tax or financial advice. Check with your certified and licensed professional for actual advice.

 

thanks ，the info made me more clear.I live in california,my accounting person told me go INC and taxed as S corporate,what od you think

 

I think corporations in California, and all other regulatory and tax things (permits, fees, licenses) that come with it, are way expensive and a way to milk small businesses of their hard earned money. I also think that you might be better off to relocate your corporation to a neighboring state, such as Nevada, Utah and even New Mexico, if you can. Not easy to do, but something to think about.

Also, by not incorporating at all, you would save money, although would be less protected legally - just some thoughts. Depends what's more important. Write out all the various expenses you would have in registering and maintaining your corporation/LLC in CA and then decide.

 

Have you ever ran a business before?

If you incorporate, the money is not yours. Any transaction to bring money to you is a taxable event. In the event of a S-Corp, you are limited on fringe benefits to the shareholders like health insurance.

You have to have board meetings.

Even the LLC causes problems with the money.

Question is, how precise of records will you do?

 

Just get a lawyer who knows how to answer the questions for your situation. Not one person is the same as the other with their business.

I tend to stay away from LLCs and S corps because you can end up not saving money on taxes where a plain jane corp with a good accountant can save you a some money in taxes.

 

Well said.

 

An properly structured LLC, S Corp., or even a C Corp. is absolutely essential once you begin hiring drivers and assuming all the additional liabilities that come with running a business. The LLC business form is recognized (though disregarded for single member LLC's) by the IRS and most states, though there is still much more uncertainty around the legal status than the more established corporate forms of business It is much easier for the IRS to "pierce the corporate veil" with a single member LLC if the single member included in the LLC personal assets such as homes and cars, as they have no legitimate business purpose. These assets must remain separate from the business entity (LLC or corporation) in order to preserve the protections you are trying to get by creating the business in the first place. The same is true when you do not fully "commit" the assets to the business through proper and complete registration of all company assets to the business, instead of maintaining a personal stake in them (using your SSN on certain documents instead of the company EIN). The paperwork and fees required up front will more than pay for themselves in the long run if you were to experience a single serious accident with one of your drivers. The business might be bankrupted, but your personal assets (assuming no personal guarantees on any business loans) should be fully protected.

 

You get what you pay for. The cheapest is not always the best, and most people are much better off in the long run at least paying a business attorney for a review of the LLC Operating Agreement or the Articles of Incorporation for a corporate business form. Boilerplate Operating Agreements and Articles of Incorporation are rarely appropriate for any specific business form, and must be heavily customized to provide the protection you need.