Best legal structure for forming a fleet

C corp should be the way to go.

You will save more in taxes if you have good advice. I pay less than I would if I was anything else.

BUT here is my real problem with any of this, YOU NEED To get an accountant and a lawyer before you start planning and pay them to answer questions on the business end of it IF you are starting a fleet.

 

I have an S Corp. My wife and I pay ourselves on payroll a “reasonable” amount and then anything we take extra above that is a distribution. That’s how we have always done it and was recommended by our accountant in to avoid as much double taxation as possible.

We run everything under 1 company but now I wish I had more companies since we are much bigger. Need a company to own the trucks, a company that actually operates them and leases them from the owning company. Need a company for our brokerage and maybe one for our warehouse. It’s ridiculous really but it’s all in the name of limiting liability.

We just wrote a sizable check to get another 2 million umbrella liability policy in order to have some further protections. When you start accumulating some wealth you become more and more a target to come after and take it.

Mo money mo problems!

 

I’m no accountant and I just know enough about that to be dangerous. My wife would know more.

Having said that we used to pay ourselves $10/hr each 45 hours per week. That of course you pay payroll taxes on. Then say you wanted to take another 30 or 40k as distribution you could without raising any red flags. As long as you are paying yourself a reasonable wage. However, we ended up bumping ourselves up to 20/hr just in case.

The distributions are taxed at whatever percentage the rest of your income is. The trick is to use your 179 deduction to depreciate your equipment down to lower brackets but use as little as you can to save it for future years. This year with the new tax plan there is a 20% off your tax bill so now it’ll be a fine line between using depreciation to lower it, but also utilizing as much of that 20% as possible.

Not sure if I’ve answered your questions. I don’t know the jargon just the common sense of it all. But yes, I guess if your losing money and take a distribution then it would be tax free lol.

Edit: as far as limits I’m not totally sure. There may be a percentage sweet spot. However if your paying yourself 75 or 100k per year and doing payroll taxes in that, I’d think you could get very aggressive on distribution with no problem.

 

If it’s truly a fleet, c class for many of the benefits that come with it, one of them being able to leave assets in the company (cash) instead of having to distribute every year.

 

You don’t have to distribute any cash if you don’t want too. Maybe if you are a partnership and one of the partners wants money then you may be forced at that point.

I would never have a partner though. Been there, got away from that.

 

You would still pay federal, state, and local income tax rates on the distributions, you just don't have to pay the 15.3% self employment tax that you have to pay with the W2 payroll income. So if you're leaving the distributions in the company, you are still paying the high tax rate to do so, compared to the c corp structure. Using a c corp to build assets, and only paying a 20% tax rate on those profits, would save the most money. And using a separate s corp "management" company to pay yourself and save on SE tax with your distributions.

Consult a licensed CPA.