I'm looking to become a lease operator in the very near future. My question is, do you need to establish an LLC as a lease operator? and if so, do i need to do that before i get the truck? I'll greatly appreaciate all answers.
Getting a LLC
Discussion in 'Ask An Owner Operator' started by Kevo The Trucker, Feb 21, 2017.
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Basically get LLC first then use it for everything and don't mix and match later when you get your first DOT audit it helps them to see everything the same.Lepton1 Thanks this. -
Usually LLC's are used for asset protection. As a lease purchase driver if you arent broke now you will be soon so I'd save my money.
clausland Thanks this. -
Asset protection works IF you keep accounts separate and only draw a salary or wages from the business account to your personal account. Business account for anything truck related, personal account for personal items. That protects your personal assets as the truck owner.
If you're also the truck driver, your personal assets are still fair game if you wreck.
If you're the owner AND driver, an LLC won't protect you. It is there to protect the carrier, because on paper all of their interactions with you are B2B. You are acting as an agent of your LLC, which is the entity with which they have a contract. That makes it more difficult for you to claim you're really an employee of the carrier later on if things don't go your way.1johnb, ramblingman and farmboy73 Thank this. -
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As a single member LLC, you are a "disregarded entity" by the IRS, so you file your taxes no different than as a sole proprietor. If you incorporate (S-corp or C-corp), you have more rules to follow (officers designated, annual meeting, etc...) that you must do and keep records of in order to protect the corporate veil in a lawsuit. That also allows you to pay yourself a salary (on which you pay personal income taxes, ss & medicare). You pay corporate income taxes on the business's profits. Contrast that with a sole proprietor where the gross minus deductions equals your income, and that's what you pay income taxes as well as ss & medicare taxes. If you're doing really well, it would make sense to incorporate for the lower wages for the ss & medicare. Or, you could say the added hassle ain't worth the savings and just go LLC.
Whether you're an LLC, S-corp, or C-corp doesn't change the fact that if YOU are the one driving the truck, YOU can be personally named in the lawsuit if you wreck, which puts your personal assets at risk. Hell, that's the case as a company driver, too. Forming a corporate entity won't really do much to benefit you personally unless you start hiring drivers to put in your trucks. It is required by the carrier to protect the carrier from you as long as you're the only driver you've got in your truck.Lepton1, Mattflat362, IndianaF150 and 4 others Thank this. -
No business structure protects you when you are the driver and owner. They will just name you both in the lawsuit.
To protect assets onshore an irrevocable trust is best. Asset protection trusts are available in some states,but either will cost you 5k a year to maintain.
To protect assets offshore a foreign trust in a place like the cook islands will do the trick,but cost 10k a year to maintain.
Odds are if your lease purchasing a truck you dont have much to protect and cant afford these options anyway so dont worry about it. -
The poor mans tools for asset protection are your states homestead act and protected retirement accounts.
Lepton1 Thanks this.
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