Getting a LLC

My 3 cents. Get EIN number check the Sole Proprietor box. For a single driver anyway, especially first year. Taxes are easier to file. If you add on drivers at a later date then you could incorporate.

 

There is no reason for you to do an LLC.If your driving the truck just run as a sole proprietor.

 

In my position, I'm not going to take a big personal wage while getting started,( my personal expenses a month are less than $300), so would it make sense to incorporate as a C, for the advantage of letting the corporation pay less the I would as a sole or LLC? If a sole would take gross minus deductions and that would be my wage versus only taking say $500 personal wage a month and then at fiscal end take a bonus if needed?

 

Not sure if I understand what your asking......

Please explain what "getting started" means...

Generally speaking If your a 1 man show, I would just pay myself a normal wage....you can still write off stuff for your business. To me it does not make sense to set up a complex tax structure for a 1 man show. Someone correct me if im wrong but a CORP with a C status is more for a larger Corporation with lots of revenue and many owners. So you saying "I'm not going to take a big personal wage while getting started" doesn't sound right because eventually when you do your going to be double taxed. Taxed at the Corporate level and at the personal level.

With a Corporation your personal assets are also on the line while with a LLC they are not unless you personally guaranteed something. But if your the driver and the owner then it defeats the purpose of starting a LLC. If you Kiss someone from behind at a redlight your going to be screwed. That person is going to sue you (the driver) and your LLC. Now if you have a fleet with a LLC and your driver (employee) kissed someone from behind then only the LLC and that driver would be on the hook. Not your (the owner) personal's assets.

Hope that helps.....

 

Don't assume that by having an LLC you won't be taxed twice by the state.

Some states like Tennessee did tax LLC revenue, 10 yrs ago and probably still do.

Oddly enough, Tennessee has no state income tax, so they started taxing the LLC's.

 

If the "wages" you pay yourself are considered too low for the industry, you run the risk of the IRS claiming you're cooking the books to reduce your tax liability. Just because you only have $300/month in expenses doesn't mean you can pay yourself a $100/week salary to avoid employment taxes on the rest...especially if you're working 60-70 hours/week. They'll come after you for the difference...along with the penalties and interest.

 

Don't forget that as a single member LLC you don't pay self employment tax. You claim all your deductions and pay on your net.

 

I guess what I'm saying is that I only wanted to take a small wage at first to build up the company cash reserves faster for unexpected things out there. I can always give myself a raise after things get going better.

My understanding of the LLC is that your gross minus expense deductions is the wage that have to take. With a C everything is run through the company first (taxed once) and then wages payed out (taxed again). but with small wage, such as $500/ month, my taxes shouldn't be much.

I wasn't aware of the self employment tax exempt as Landslide said. I will be getting with a tax consultant to see what the best way to continue but just want advice from people in the industry and actually doing it.

Not trying to hijack Kevos' thread either.

 

The self employment tax still must be paid, even as an LLC...all that is different is how the taxable income is determined.

LLC or Sole Prop: Your revenues minus expenses & deductions equals your income. That's the amount upon which you pay both income and employment taxes.

S- or C-Corp: Your revenues minus expenses is what your corporate income taxes are based upon. Your salary is paid to you, and your personal income taxes and employment taxes are figured off of that amount.

Now, it might work out better as an LLC/Sole Prop...or you might be better off as an S- or C-Corp. Don't know 'til you run the numbers. However, keep in mind that social security benefits (retirement when the time comes, disability IF something were to happen) are based off your personal earnings, NOT those of your corporation. In other words, if you're only paying yourself a small salary, your benefits will be based off that small salary.

 

For a lease operator, starting an LLC is just asking for more headache. There are no asset protection since you will be the driver and held liable, and there are no tax savings. In fact, you will pay more money when tax time comes because most accountant or tax preparer will charge corporation entities $1,000-$3000 to file taxes for them. Be very weary of folks charging less because they usually are the ones that are inexperience and get you audited by the IRS. Also all corporate entities must pay fees and be incompliance with many state and federal paperwork or more fines will be assed.

Now being a lease operator under your own name already gives you a lot of tax deductions that a company driver does not. Examples of major deductions are, Per Diem ($47 per day not at home deduction off your gross income). Most Lease operator are OTR so that helps a lot. Company drivers cannot claim per diem. Then you still have many more business related expense to deduction from your gross earnings. After all the business deductions, your adjusted gross income are figured, you can still use the standard deduction that the IRS allows for each family to claim. Self emply does have a lot of tax savings if done correctly.