Corporation vs LLC

That's for you and your accountant to decide. I have an LLC now that I use and I still have my old s-corp. There wasn't any benefit either way for me cause they are both have pass through taxation. The s-corp is a little harder to pierce if you were ever sued but if you drive the truck you can still be personally held liable anyway.

 

As I stated above, an LLC is a state creation so it means nothing for tax purposes. You either claim all the income personally on a 1099 or you form a corporation.

"An LLC is an entity created by state statute. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner's tax return (a "disregarded entity"). Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation. And an LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes), unless it files Form 8832 and affirmatively elects to be treated as a corporation."

Single Member Limited Liability Companies | Internal Revenue Service

If you read further it says an LLC is a "disregarded entity". You claim business expenses on Schedule C of your form 1040.

As for claiming per diem as a 1099 recipient I do not know the answer to that. Everything I've read is that W-2 employees can no longer claim per diem but the company can pay it and it does not show up as taxable income on the W-2.

 

Single member or partnership llc either as a pass through or s-corp are the same and piercing the protection is not hard at all.

 

Just one thing not clear here: Your IRS tax status (Sole Proprietor/Schedule C. Partnership, S-Corp, C-Corp, etc.) is an almost entirely separate category from the LEGAL form of your company.

All these assume you're not a W2 employee, of which none of this normally applies.

No corporation/LLC/etc as one person: You're automatically a Sole Proprietor/Schedule C.
No corporation/LLC/etc as more than one person: You're automatically a Partnership (never do this btw)

LLC as one person: A "disregarded entity" per IRS, so automatically a Sole Proprietor. Can elect S or C Corp Status
LLC as more than one person: A "disregarded entity" per IRS, so automatically a Partnership. Can elect S or C Corp Status

Corporation: C Corp automatically, can elect S Corp Status (provided certain criteria are met)

This really depends on the circumstances and the state, but in trucking there's really no reason to run through the motions of piercing the veil unless the O/O or one of their investors has other wealth to go after, and even then, only if the insurance refuses to pay. Of course, no corporate form is going to stop an aggressive debt collector and almost every big debt incurred by a small LLC or Corp is going to have a personal rider attached to it anyway.

While the specific guidance has not come out, those subject to DOT Hours of Service limitations (i.e. OTR Truckers) may still claim this, depending on their particular circumstance. It may be more advantageous to do other things depending one the taxpayer's earnings and situation. However, basically nobody else will get it though, they got rid of almost all the deductions for individuals.

 

As IRS is concerned you are a Sole Proprietor. You make enough that you need to set up so you are taxed as an S Corp, simple one page form....easy peasy and pay yourself $35k/yr. That way your only paying SS and Medicare tax on $35k instead of $250k your making now

 

Yes it does depend, most of the time, but in this regulated enviorment, negligence that appears by the actions of the owner(s) through a lack of operational policies or through falisfying/lack of federally mandated records justifies going after the assets of the owner(s) if there is unsatisfactory compensation or there is a need for punitive damages through that negligence.

By the way are you a lawyer?

 

I've got the form just never fillled it out and filled it. $250k? You know cooking the books like that doesn't end well for most people. Lol

 

You're touching on a LOT of different legal nightmare scenarios in this one. That being said, each thing you touched on does a little cakewalk around the corporate veil and head directly for the responsible individuals, but does not pierce the corporate veil so as to render it inoperative.

Negligence, depending on degree, is always going to come back down the negligent party and chase money from there regardless of which corporate veils are along the way.

Falsifying records or not performing required recordkeeping is also on the party responsible for failing to keep those records, if they can prove it. A driver willfully goes beyond HOS? That's not on CRE, unless the driver can prove CRE pushed them (and they will go to the mat on that in litigation/arbitration). That being said, if I can prove CRE had the capability of stopping the HOS violation and did not even bother to try to Qualcomm the driver...that's a whole other thing.

You'll have to clue me into what you mean by unsatisfactory compensation. Wage theft, depending on the state, is one of those things that walks around the corporate veil in a lot of cases but doesn't necessarily pierce it or render it legally inoperative.

Punitive damages, depending on the tort and the parties responsible, are one of those things that a corporate veil will protect. If I have an LLC and my partner with an otherwise stellar record gets drunk one night and mows down a preschool with the truck we own, I'm very unlikely to lose my house over it if I had nothing to do with the incident. (I may lose my house having to pay legal fees to defend myself if the insurance doesn't, but that's a different matter.)

I ain't passed the bar, but I know a little bit? I have been deposed and assisted counsel in deposing others ever since I can remember for various employers. I had a brief stint providing litigation support after I cashed out of a startup. I'm just an MBA who passed the CPA exam but never became a CPA for various reasons.

 

What about non-accident situation where no blood was shed and no lives were lost, in which there is a cargo claim that insurance does not want to pay, or some other business liability - for instance inability to pay off a bank credit line/business credit cards or an equipment loan (assuming there is no personal assets collateral) or a factory sues you for making a late delivery for a quarter million - the cost of interrupted production process (making this one up for the lack of better imagination).

In other words, how's the bankruptcy of an S-Corps or LLCs affecting their owners personal assets?
In case of a bankruptcy of "Me & My Truck, Inc", does the owner walk away unscathed with his personal assets with ability to form yet another business and start all over?

I am sure at that point, one has to get caught up in keeping the whole corporate facade quick with the annual meeting minutes (in case of one owner operator it is somewhat comical) and what not. I can imagine, for example, that If they can show the business account having been treated no different than personal or a business credit card swiped at the Six Flags ticket booth more than once then it could be a little problematic, but I don't know.

 

OK I get where you are coming from.

My comments stand because they are backed up with actual events that have happened to either myself or other owners.