Best State for Owner Operator Trucking LLC

Here's the deal with trucking. If you are just going to lease to a company, you can choose any state you want really. If you're going to have your own authority, IRP requires you to have a physical presence in the state you are registered out of. So if you live in NY, and want to run FL plates, your going to need an office in FL with an employee. Ever since the debacle with Oklahoma, it would be wise to just incorporate or LLC in your home state. The fines for IRP and IFTA fraud are steep and unforgiving, and they wait until you've dug yourself too deep in the hole to get out. Imagine after running 3 years on another state plate they audit you, determine your place of business is so and so state, therefore your IRP fees from the last
three years are forfeited and you owe them again plus penalties and interest.

I didn't commit fraud, and still had to forfeit 2 years of IRP and had my mileage knocked down from 5.7 to 4.7 on IFTA which resulted in a large amount owed, plus the interest from the audit period starting 4 years previous. Do it right from the beginning and you won't worry.

 

You may want to check, Maine is a pretty Tax-friendly state, though I'm guessing Montana is too... Don't come to Connecticut, LP's, LLC and S-Corp. business now have to pay a $250.00 "Business Entity Tax", that's on top of any other tax, in other words, just for being a business, the state get's $250.00. That apparently does NOT apply if you are set up as a "C" corporation, however. ALSO, the CT regulation states that an out-of-state company must pay this tax, too, if is the type of business "required to obtain a certificate of authority... before transacting business in Connecticut". Not sure exactly what that means specifically for O/O's passing through but it SEEMS to be saying that out-of-state registered business must pay the $250.00 too. UNLESS YOU ARE A "C" CORPORATION. More on that:

I read another post the person was asking about Partnerships vs. LLC vs. Corporate forms for the O/O business. Another post mentioned that there was trouble and he had to sell everything and had legal troubles because the "other Lawyer broke the Corporate Veil". Remember that if you incorporate you MUST play the paperwork game with up-to-date corporate records. If you don't the courts figure you're not a "serious" corporation and they allow the opposition's Attorney to "break the veil" and treat you like a sole proprietor or partnership, in other words, take your house, car... life, etc. If, say, you were involved in an accident that caused a fatality, and your business structure does not protect your personal assets, your life is pretty much ruined, future earnings gone... forever. You must be especially diligent if you form a "C" corporation, the compliance requirements are much stricter. The liability and protection of personal assets benefits of a "C" corporate structure are (generally) worth it, but keep in mind it's another hassle you MUST stay on top of.

 

Anybody have any information that might help me in setting up a trucking LLC in Pennsylvania?

 

You pay less taxes as a sole propriorter. Filing LLC or Inc. thinking you have some kind of protection is wrong unless you own a bunch of trucks, one or two trucks you are on the hook for everything anyway. Now a accountant may tell you different thats cause they make more money.
As a sole propriorter you can do everything yourself.
Look up the legal statutes if you think otherwise.

 

If you're driving the truck under an LLC or Inc. and have a serious accident you will be sued personally as well as the company most likely so it's not going to keep someone from going after your personal assets. I think it's most beneficial if you have hired drivers operating equipment. If you do it right I'm not sure the tax issues are that different (at least in TX) either way until you start generating alot of revenue.
It seems like a lot of headache to have a C corp for a one truck show. I may go that route if I ever get truck # 3 and 4.

 

An IRP application cannot be audited under first year estimates or second first-year estimates, if the actual mileage started after the mileage-reporting period for the second application. The first available application is the first to have actual reported miles. That application cannot be audited until the IRP year is completed so no additional transactions can be perform on the account. Therefore, it would be at least a year after the application is actually filed. Any audits prior to that would not count towards the state's quotas. Many times the first available application with actual miles is a partial year and may not be audited. IFTA audits are typically tied to the IRP audit year so the amount of work that the auditor does is efficient.

As in Oklahoma cases, if there is an link found to a less then above board company, any company having ties to that company, such as a listed contact, will be audited. The discovery process on that takes awhile especially in the case when the auditing state needs assistance.

 

My accountant was just talking to me about going from Sole Proprietor to LLC or S corp, not for liability issues, but to escape self-employment taxes. I'm guessing this outweighs the added expense of tax prep fees for LLC and S corp.

Thoughts?

BTW, base/domicile state is TN.

 

If you set up a S corp you will have to a salary thats taxed. Now if you're making more than average income it may be worthwhile.
But you will have to have a "average" truck driver income thats taxed.
MY guess would be the average income for a driver at 35-60,000 depending on the area you live. You won't be able to funnel all the money out of the S corp without taxes. So for the average 1-2 truck operator I would think S corp costing more, cause you will probally have to have a CPA do your taxes then. As a sole proprietor I do my own. If you don't have a sufficent salary the IRS wil create you one and send you a bill for unpaid taxes.
And if your CPA advises you wrong you still owe the money not him. So get more than one opinion of those you trust.